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Accounting Implications to Enron Corporation - Case Study Example

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The essay explores the accounting implications of Enron Corporation, an American organization based in Houston. Prior to its bankruptcy, it was among the world's major energy corporations generating high revenues…
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Accounting Implications to Enron Corporation
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Download file to see previous pages It is evidently clear from the discussion that the Enron Company had a robust outlook of accounts; it was highly valued stock, and it had a good reputation for making profits. Being a fast-growing company with high promotion activities, Enron was heading for great heights in business. These characteristics are ideal for any person who wants to invest, and therefore, Enron had many investors coming. The accountants did not lay out their true and fair financial records. The accountant’s application of creative accounting practices to manipulate the accuracy of the records was a common practice. The management did this by establishing many limited liability special purpose entities in order for Enron’s accounting officers to transfer liability. This bid to ensure all accounts appear without liabilities was a strategy that seeks to maintain a robust and increasing stock price, thereby keeping its investment grade credit ratings. The role of the accountant is to ensure the maintenance of accurate books of accounts, a role that the accountants clearly did not perform. Confidence in the financial information produced by professional accountants is one of the main driving forces for public investments. Accountants have the role of safeguarding the public’s interest by providing information that is true and fair for investors’ decision-making. The manipulation of accounts in order to favor the company and thereby deceive the public to rush to invest is unethical. There is a conflict of interest in these dealings. The accountant has to oversee the maintenance of the image of the organization and at the same time protect the interest of the public. This context becomes worse when an accountant also has personal interests in the dealings of the organization. In such instances, accountants should declare any form of conflicting interests and seek guidance when working during such situations. However, this was the fraud by the organization; the public interest should take precedence over personal and organizational interests. ...Download file to see next pagesRead More
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