Enron Plans for Reorganization

Tax avoidance is lawful; it's something the tax code allows. Tax evasion is unlawful and men and women observed guilty of tax evasion are subject to criminal penalties. Dressing up a company's financial condition is allowed provided the business does not cross the line among financial manipulation and accounting fraud.

According to Timmons, Thornton, and Woellert, as damaging as the decision was to commit accounting fraud, it was an even greater shock to find out that Enron's senior managers produced millions of funds dumping their shares of Enron stock while urging employees and stockholders to purchase or retain their soon-to-be-worthless stock. The authors suggest that ambition and pride, rather than greed, may well have caused Enron to collapse. They note that Enron succeeded as an energy trading business mainly because innovators, including Jeffrey Skilling, created the proverbial much better mouse trap. Spurred by a combination of desperation, ambition, egotism and pride, Skilling as well as other senior executives started out to take in far more chances in an effort to bolster their as soon as untarnished record of achievement and financial success. When it became apparent they could no longer disguise Enron's financial issues lawfully, they chose to commit fraud instead of admit the company was failing.

Timmons, Thornton, and Woellert note that one of the most interesting facts uncovered right after Enron filed for bankruptcy protection was how numerous men and women played a role in deceiving investors, stock analysts and other.

Patrick A. Casabona in Review of Company (2003) adds that SAS 99 requires independent auditors to realize the organization rationale for any unusual company transactions simply because these have the greatest propensity to be fraudulent. CPAs are now required to conduct screening to search evidence of fraud, and well as to examine the controls a business has in location to prevent or reduce the chances of financial or accounting fraud occurring with or with out the knowledge of senior management and also the members with the Board of Directors (Casabona, 2003, 5). Michael Ramos in Journal of Accountancy (2003) explains that if an audit uncovers accounting fraud, the auditors have to write-up the facts, attempt to get more evidence, think about the implications on other aspects on the audit, discuss the matter of the company's management and with its audit committee, and if appropriate, suggest the buyer consult an attorney (Ramos, 2003, 28).

John Weinberg in Economic Quarterly (2003) notes that many decisions in accounting involve rules that can not be broken. More than the last quite a few years, Enron and a quantity of publicly traded firms have broken quite a few of these rules. In making so, they have committed accounting fraud and ultimately had been forced into bankruptcy protection. These bankruptcies have resulted within the loss of tens of thousands of job, and wiped out hundreds of billions of money in stock value. These bankruptcies have wiped out the life savings of many investors, former employees and retirees. The bankruptcy filings called into question the effectiveness in the U.S. Securities and Exchange Commission's oversight of publicly traded companies.

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