Accounting fraud - Coursework Example

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The case of Enron helped me understand the intricate delicacies that revolve around the sole aspect of business. Independent Audit forms an important component of the lessons that I have…
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Accounting fraud
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Questions Enron Scandal was one of the biggest mishaps that took place in the industry of business. The case of Enron helped me understand the intricate delicacies that revolve around the sole aspect of business. Independent Audit forms an important component of the lessons that I have learned after going through the case in detail. A firm should always have an independent audit so that both the investors and the stakeholders are aware of the profit margins. It also helped me learn that customized entries can form a flawed system in view of the company. One should always be careful when all the details are being sought out so that these issues can be avoided. The aspect of Fair Value Accounting is being used differently all over the world but it was wrongly used in Enron because it was not being checked upon by the relevant authorities. It becomes necessary for the regulation bodies to keep a check upon any such activity that is being carried out by the different companies. All these examples will help me in avoiding these issues while pursuing my career so that these kinds of fraudulent activities are completely eradicated from the society.
In my view accounting fraud is related to any act that conceals the facts relating to the finances of the company. This concealment of facts can lead the potential buyers to be interested in the company and hence the shares of the company. Another example of accounting fraud can be taken in the case of companies who deliberately delay their financial bookings to an appropriate time in the future where they may balance out the profits. This specifically means that the company would cross out the transactions that are decreasing their total worth. This transaction can later on be put to the journals when the company has enough to overshadow the losses. This can help the company to gain shares and increase their market value as Enron was able to do and achieve higher profits than they actually deserved. In other words this practice can co-relate to the accounting frauds that can easily take place in the absence of the regulatory bodies.
I believe that the companies can take different measures to avoid fraudulent activities that are being conducted. This revolves around the hierarchy of the company and the management is primarily responsible for any type of fraudulent activity that is taking place in the company. The managers should be held responsible for any omission or suppression of the transactions in the journals. This way the managers would be careful when handling their employees and an order of hierarchy would be achieved. The managers should also be reviewed by the higher ups so that the stakeholders are aware of the ongoing processes that are taking place in the company. Moreover, the company should always hire independent auditors so that any type of flaw in the whole system can be detected earlier enough. These auditors should be regulated and checked upon by the relevant authorities to avoid any mishap such as the Enron Scandal in which the senior auditor himself was involved. Read More
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