Fraud Examination Enron Paper

1140 Words Sep 16th, 2011 5 Pages
1. Define the problem(s)
Enron failed to record some of its transactions. Arthur Andersen did not allow the LJM financial statement to stay unconsolidated.
2. Analyze the situation - again, take a "lessons learned" approach. You might use the following questions as guides:
A. What important internal controls were ignored when LJM1 was created? LJM1 ignored some of Enron’s entries in the books that were missing. Outsiders owned less than 3% of the Special Purpose Entities equities. There was an error made by Arthur Andersen to let LJM’s financial statement to remain unconsolidated. If the financial statements had been consolidated, some of the errors could have been found. They may have even had some time to correct these errors before
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The employees did what they had to do to stay in the running even if it was illegal.
C. The fraud at Enron is one of many major financial statement frauds that occurred in recent years (Qwest, Global Crossing, WorldCom, etc.). What are some factors that could explain why the falsifying of financial statements is occurring so frequently? The falsifying of financial statements occurred so frequently because they were so much pressure for the employees to succeed. The turn over at Enron was so high. The employees were kind of desperate to keep their jobs. All of the employees were forced to compete against each other. The pressure was there for employees to make sure that their peers did not out do them in all aspects. It is hard for the employees to stay honest as they are working under those kinds of pressure. They had all the opportunities to hide all negative debts and poor investments.

D. Suppose you are a certified fraud examiner but enjoys investing in the stock market as an additional source of income. Upon doing research of Enron’s stock, you notice that although its stock has a history of strong growth and a seemingly promising future, Enron’s financial reports are unclear and, frankly, confusing. In fact, you can’t even explain how Enron is making money. Could this lack of clarity in its financial reporting serve as a red flag in alerting you to the possibility of fraud at Enron? Why or why not?
I believe
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