Assignment 3 Fraud in the AIS: Unraveling the Enron Scandal

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Running Header: ASSIGNMENT 3: FRAUD IN THE AISAssignment3:Fraud inthe AISStudent:Instructor:Date:Analyze the accounting system failures that led to the collapse of Enron, with a focus on the roleof third parties such as Arthur Andersen. Discuss the cultural and systemic issues within Enronthat contributed to fraudulent practices, and explore the preventive measures that could havemitigated these failures. Your analysis should be supported by relevant examples and references.Word Count Requirement:1500-2000 words.

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ASSIGNMENT 3: FRAUD IN THE AIS2Accounting System Failures and EnronIntroduction:The 1990s saw the United States appreciate phenomenal financial development.This would be driven to a great extent by the huge benefit of huge corporate elements andmultinational combinations. At the tallness of this time of monetary dynamism, it did give theidea that these corporate elements were driving the charge toward another national thriving.Tragically, the decade instantly from that point would demonstrate a lot of this unbridledaccomplishment to be fabricated and a great part of the benefit to be absolutely false. Brokenbookkeeping practices would be uncovered as a most slippery offender as a pile of corporateembarrassments got to be clear in the mid 2000s. Positively, none of these bookkeeping outrageswas entirely as unmistakable as the breakdown of Enron and its bookkeeping accomplice, ArthurAndersen.The occasions of 2002 would start the revealing of a universe of improper practicesand would show the requirement for far more noteworthy straightforward, oversight andauthoritative intercession. This essay will discushere considers theaccounting systemat Enronand how this delivered a situation wherefraud, theft and duplicity were a piece of theorganization society.Accounting System Failures:The systemfailurethat took into consideration the breakdown of Enron was neitherspecialized nor unplanned. They were unshakable, designed and inevitable1.The flaw in theaccounting systemwas that it could be held prisoner by the voracity and aspiration of a center ofdegenerate administrators. As indicated by BBC News (2002), reporting at the season of theoutrage's disclosure, “Enron lied about its profits and stands accused of a range of shady

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ASSIGNMENT 3: FRAUD IN THE AIS3dealings, including concealing debts.” (BBC News, 1) According to these revelations, Enron’sexecutive leadership had conspired to falsify its economic performance in order to stoke higherstock values and embezzle massive sums of shareholder money.When the company’s straw house of false earningscould no more maintain its weight andthe biggest vitality supplier in the country given way. Its shareholders pulled back theirremaining ventures, the organization petitioned for Chapter 11 insolvency, and every one of thatwas left was a tangled legitimate wreckage for prosecutors to deal with. The financial harm ofthe Enron embarrassment was totally huge. According to the article by Iwata (2002), Enron “had$100 billion in annual revenue, suffered a $1 billion loss, restated $600 million in inflated profitsand filed for bankruptcy restructuring. About 4,000 Enron employees were let go. Top Enronofficials ran a vast web of partnership deals that misled Enron and investors, according to anEnron internal report.” (Iwata,p.1)In many ways, the accounting system failures revolved almost entirely over the ability ofleadership to manipulate and falsify performance. In other words, there was a willful subversionof accounting transparency. The great flaw in the accounting system would be its devastatingvulnerability to subversion. What makes the Enron scandal so remarkable is that its perpetratorswere able to conduct this massive accounting fraud in broad daylight, systemically and on a levelwhere most personnel felt pressure to enjoy the spoils or be the subject of suspicion. As Bryce(2004) reports, “flowers, first-class airfare, first-class hotels, limousines, new computers, newPalm Pilots, new desks—Enron employees began to expect the best of everything, all the time.”(Bryce,p.134)These expectations fed into the accounting system’s flimsy connection to reality. Andbecause so many employees at every level of Enron’s operations came to enjoy the benefits of its

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