Enron made special purpose entries to conceal loses and increase its ability to borrow money.

What are three criteria necessary to avoid fraudulent financial reporting, and how did Enron’s management comply or not comply with each?

• Technical Compliance: a transaction must be recorded in accordance with generally accepted accounting principles (GAAP). Enron may have met the first criteria because its transactions were apparently recorded in technical compliance with GAAP. But,

• Full Discloser and transparency: discloser must be sufficient to ensure that the effects of the transaction are transparent to the reader of the financial statements. Enron did not meet the third criterion because the notes related to the SPEs in Enron’s financial statements were written so obtusely that they were not transparent to the reader. There was very little public discloser regarding Enron’s many hundreds of partnerships. Enron did not disclose that banks lent up to 97 percent of the capital needed to form a partnership. The partnership was expected to repay the loan from cash generated by the assets it received from Enron. If the partnership could not repay the loan, Enron pledged to make up the short falls in cash.

It does not do any good to have a code of ethics hangs on the wall and is not practiced. Promote their ethics plan and start to regain employee trust. All ethics have to be practiced from the top down.

I don’t believe there will be many changes in the accounting from a federal level but that the board of accountancy will put more stringent regulations on the accounting industry.

Yes, I think no person is worth millions of dollars a year no matter what their position in the company. Especially when they are receiving millions of dollars and its lower level employees are not compensated for their positions which are also important to the company it takes all position in a company to make it work.

Enron’s code of ethics answered such questions such as “What is important in the company?” “How do we treat each other?” “How do we do things around here?” Corporate culture may be conveyed through employee hand books, formal codes of conduct and extracurricular activities and anecdotes. All of which lower level employees believed was happening at Enron.

Some topics in this essay:
Peter Lynch, Enron Enron’s, GAAP Enron, , SPEs Enron’s, Third Enron, Technical Compliance, economic substance, lower level employees, ability borrow, special purpose, financial statements, lower level, enron’s demise, technical compliance, corporate citizenship, level employees, transparent reader, special purpose entries,