Posted at 10.06.2018
According to the case study the company possessed never gone for just about any braking of any rules and regulations or the regulations. Actually the company was following practice of the Financial Accounting Standard Board's (FASB) rules. According to this the business the using "Recognise TO ADVERTISE Accounting". As per this accounting system the company can include in current revenue those profits that they be prepared to earn on energy contracts and related derivatives quotes. The business was posting profits, quite significant, for non cash profits that they be prepared to realize in the foreseeable future. In lay mans terms we were holding following the cash flow on the assumptions. They insurance policy practices the assumption of the uncooked materials or the completed goods price according to the expected soon. Although the company was using the price of the goods that was expected in the foreseeable future but circumstances change and every time the overvaluation or the undervaluation of the power was there. This resulted into non match of the balance mattress sheets with the actual figures which should have been there in the total amount sheets.
Secondly the business was using the idea of special entity assignments, according to that your company was using the amount of money of the gains but there were many of the projects which were not completed and resulted into debt and such valuation had been used in the balance sheets.
Thirdly the company was following a standards of reimbursement to their employees. Option of stock options was given as a part of compensation to the company officials. The only thing lacking on the part was that the business gives excess payment to the executives.
Thirdly there is a concept of off of the books entities. Based on the set standards the company can go for a few of the from the book entities of which there would be 50% stake in the other companies but here the business was using 3000 off of the book entities with 49% stake in the jobs.
In nut shell the company went all the way with the set standards but the only problem was with the interpretation of the whole regulations.
Based on the analysts the total amount sheets remain not yet determined to almost all of the CFOs of the officials. The company was using the idea of mark to advertise. This idea was totally predicated on the assumption soon. But the key area of matter that are the customers are not taken into account. The idea is not yet determined to most of the people. The idea named from the book entities also increases the over puzzling character of the total amount sheets. Adding to this the company paid zero taxes in the balance sheets. By using special entity projects they were able to manipulate the belongings and liabilities of the company with the copy of the same with the Cayman Island assignments.
Question 3) Can it matter that a lot of traders in Enron were relatively advanced financial institutions? How about the employee's ownership of the stock and their 401(k) strategies?
it issues too much to the company's reputation that the majority of the investors in the business were sophisticated corporations. For example, when for the very first time Enron traded its energy as item in Wall Neighborhood Market, the talk about prices of the business raises. The price was $85 each when floated even for the first time. By using such a solid financial institution the costs of the stock increase much that created the overvaluation of the business's wealth. Also because of this strong backing the company controlled all the energy market in U. S.
The company's employees received 401(k) plans. Matching to such strategies, the employees were given stock option programs with the basic payment. They has spent heavily in the business's stocks and the company has a corresponding program where it contributed additional shares of the stock to saving and retirement plans when employees chose to account them with Enron stock. This has added a great value for the business. When most of the stocks or the stake has been managed by the employees then it has added to the worthiness addition for the company. As per the case also under 401(k) plan the business offer the payment as per the performance of the employee and associate it to the total amount sheet of the business where it uses symbol to market insurance plan.
Question 4) The way the top authority at Enron undermined the building blocks beliefs of Enron code of ethics?
for the company it's the top management always made the code of ethics. According to the case, The top management never go for ruining the rules and laws but it offers always said its employees to control the laws. The business representatives themselves have given the orders with their accountants to received for the best way to save the taxes. It was on e of the employee's saying that people don't ruin the items when just manipulating the things. Willingly of the unwillingly the business officials specially Place and Skilling who had been the in charge of controlling the financial of the company were totally unethical plus they were focusing on the gains of the company. These were also using the unfair opportinity for getting the profits. The financial frauds, insider trading were a few of the procedures common in the top level professionals. Also they laid emphasis on the creating superficial financial accounts which is completely unethical.
Question 5) could another Enron appear now? Why or why not?
yes there has been recent scam in the organization world known as as Indian Enron as Satyam scam. The financials were hampered in this company as well. The one difference in Enron and Satyam was that the very best level admitted its submit the situation of Satyam.
* The business uses experienced skill pieces which were manipulating the regulations in a reasonable way.
* Uses the accounting standard dissimilar to other being utilized by the ordinary companies so that manipulation is performed in better way.
* Widening business of the business was one its strengths
* The business was taking the help of top most financial institutions which were operating as a support for the company also.
* Also the company was having a sizable no. of employees who relied on the company's stock options and were getting the large chunk of stocks and options or stocks.
The approaching projects in the power generation businesses become opportunity to grow.
The special entity jobs also become a chance for the development as well as the financial confusions.
Employee's agreement of non selling of their stock options also act as an chance to invest employees money by the company.
Open side welcome by Wall Street also functions as an opportunity.
The competitors act as hazards.
Moral employees act as a danger for the company unethical deeds.
* Human relationships in conditions of job also act as a menace.
* Rules of government and other financial regulators act as a menace.
* Complex business design.
* Complex business financial guidelines.
* Sophisticated balance bedding.
* No understandable business balance sheets.