ENRON Reporting in Auditing and Assurance Principles.pptx

It is our first reporting in Auditing and Assurance Principles.

1. Group 2

2. Case on hand: Enron Corporation Case on hand: Enron Corporation Case on hand: Enron Corporation

3. Case on hand: Enron Corporation Case on hand: Enron Corporation Case on hand: Enron Corporation

4. Do you know these guys?

5. The antagonists Ken lay

6. Jeffrey Skilling

7. Andrew Fastow

8. Louis Borget

9. Ken Rice

10. Cliff bexter

11. Lou pai

12. Tom White

13. Tim belden

14. George bush

15. The protagonists Amanda martin

16. Mike muckelroy

17. Gray davis

18. Sherron walkins

19. What went wrong?

20. Issues and topics surrounding Enron’s scandal

21. 1. Corporate fraud and accounting manipulation

22. 1. Corporate fraud and accounting manipulation Lack of Ethical Procedu -res Arbitrage Oppurtunity

23. Lack of Ethical Procedu -res Mark-to-Market Accounting

24. Lack of Ethical Procedu -res Mark-to-Market Accounting Special Purpose Entities (SPEs)

25. Lack of Ethical Procedu -res Mark-to-Market Accounting Special Purpose Entities (SPEs) Off-Balance-Sheet Debt

26. Lack of Ethical Procedu -res Mark-to-Market Accounting Special Purpose Entities (SPEs) Off-Balance-Sheet Debt The Nigerian Barge Case

27. Lack of Ethical Procedu -res Mark-to-Market Accounting Special Purpose Entities (SPEs) Off-Balance-Sheet Debt The Nigerian Barge Case Document Shredding

28. Arbitrage Oppurtu-nity Is known as any opportunity to make abnormal profit and the returns was beyon d the norm. Ricochet

29. 2. Leadership and Corporate Culture

30. 2. Leadership and Corporate Culture Ethical erosion

31. 2. Leadership and Corporate Culture Ethical erosion Image Over Substance

32. 2. Leadership and Corporate Culture Ethical erosion Lack of Risk Assess- ment Image Over Substance

33. 2. Leadership and Corporate Culture Ethical erosion Lack of Risk Assess- ment Image Over Substance

34. 2. Leadership and Corporate Culture Ethical erosion Individuals compromising their values in response to pressure from authority or corporate culture (explained in early 1960s Milgram Experiment). The Performance Review Committee (Rank and Yank) has encouraged the company to engage in aggressive and unethical practices to achieve high rankings.

35. 2. Leadership and Corporate Culture Ethical erosion Lack of Risk Assess- ment Image Over Substance

36. 2. Leadership and Corporate Culture Ethical erosion Lack of Risk Assess- ment Image Over Substance

37. 2. Leadership and Corporate Culture the company prioritized short-term gains and instant financial rewards and made substantial investments in marketing, branding, and public relations to be viewed as innovative and successful despite the deficiencies in the underlying business operations. Image Over Substance Enron teamed up with Blockbuster to deliver movies that are on demand.

38. 2. Leadership and Corporate Culture Ethical erosion Lack of Risk Assess- ment Image Over Substance

39. 2. Leadership and Corporate Culture Ethical erosion Lack of Risk Assess- ment Image Over Substance

40. 2. Leadership and Corporate Culture underestimating or disregarding the negative outcomes of the wide range of complex and high-risk business ventures they are engaged in, such as energy trading , broadband services , and international markets . In India, ENRON built a substantial power plant.

41. 3. Regulatory oversight and corporate governance

42. 3. Regulatory oversight and corporate governance Auditor Indepen-dence

43. 3. Regulatory oversight and corporate governance Auditor Indepen-dence Conflict of Interests

44. 3. Regulatory oversight and corporate governance Auditor Indepen-dence Lack of Transpa-rency Conflict of Interests

45. 3. Regulatory oversight and corporate governance Auditor Indepen-dence Lack of Transpa-rency Conflict of Interests

46. Auditor Indepen-dence Arthur Anderson is both the external auditor and the consultant to Enron

47. Arthur andersen It was one of the largest accounting firm in 1990s founded by Arthur E. Andersen and Clarence Delaney, it has more than 85 thousand employees and operates within 84 countries worldwide. It achieved the status of one of the world's largest multinational companies by 2001. It provided accounting professional services, as well as tax consulting services.

48. 3. Regulatory oversight and corporate governance Auditor Indepen-dence Lack of Transpa-rency Conflict of Interests

49. 3. Regulatory oversight and corporate governance Auditor Indepen-dence Lack of Transpa-rency Conflict of Interests

50. Conflict of Interests Arthur Anderson is both the external auditor and the consultant to Enron. Andrew Fastow was the general partner and at the same time the Chief Finance Officer of Enron which leads to a conflict of interest.

51. 3. Regulatory oversight and corporate governance Auditor Indepen-dence Lack of Transpa-rency Conflict of Interests

52. 3. Regulatory oversight and corporate governance Auditor Indepen-dence Lack of Transpa-rency Conflict of Interests

53. Lack of Transpa-rency Enron intentionally employed practices that concealed its true financial position and business activities, thereby perpetuating a fraudulent narrative of profitability and success.

54. 4. Investor Trust and Market Manipulation

55. 4. Investor Trust and Market Manipulation Fake Transac-tions

56. 4. Investor Trust and Market Manipulation Fake Transac-tions The Western US Energy Crisis of 2000 and 2001

57. 4. Investor Trust and Market Manipulation Fake Transac-tions The Western US Energy Crisis of 2000 and 2001

58. 4. Investor Trust and Market Manipulation Fake Transac-tions The Western US Energy Crisis of 2000 and 2001

59. Fake Transactions Fraudulent transactions and deceptive accounting practices misled investors and analysts into trusting that Enron was a profitable and fast-growing company. Circular Trades , Mark-to-Market Accounting and Special Purpose Entities (SPEs) are some of these transactions.

60. 4. Investor Trust and Market Manipulation Fake Transac-tions The Western US Energy Crisis of 2000 and 2001

61. 4. Investor Trust and Market Manipulation Fake Transac-tions The Western US Energy Crisis of 2000 and 2001

62. The Western US Energy Crisis of 2000 and 2001 The company intentionally withheld power supply and created an artificial scarcity in electricity which led to inflated prices due to high demand and limited supply. California was selected by Enron to experiment with this new concept of deregulated electricity.

63. 5. Employee Impact

64. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits

65. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits Pension and Retirement Funds Manipu-lation

66. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits Whistle-blower Protection Pension and Retirement Funds Manipu-lation

67. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits Whistle-blower Protection Pension and Retirement Funds Manipu-lation

68. Employee Welfare vs. Shareholder Profits Instead of looking out for the well-being of their employees, Enron's leaders were more focused on making money for themselves and their shareholders. Bankcruptcy fact: 20,000 employees lost their jobs and medical insurance.

69. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits Whistle-blower Protection Pension and Retirement Funds Manipu-lation

70. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits Whistle-blower Protection Pension and Retirement Funds Manipu-lation

71. Pension and Retirement Funds Manipulation Enron's employees relied on the company's pension and retirement funds, which they believed would provide them with long-term financial security upon retirement. Unfortunately, the company's conduct, including the handling of these funds, led to substantial losses for employees who relied on these funds for their future prosperity.

72. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits Whistle-blower Protection Pension and Retirement Funds Manipu-lation

73. 5. Employee Impact Employee Welfare vs. Sharehol -der Profits Whistle-blower Protec- tion Pension and Retirement Funds Manipu-lation

74. Whistleblower Protection despite the efforts of Sherron Watkins to bring the financial irregularities to the attention of Enron's management, the leadership of the company did not take the necessary steps to rectify the situation or provide the necessary level of disclosure to interested parties.

75. 6. Government involvement

76. 6. Government involvement

77. Presidential bet Enron had been the largest corporate contributor to the first presidential campaign of George W. Bush Even the governor of California, Gray Davis, doesn’t have the power to stop this critical situation.

78. Presidential bet The Federal Energy Regulatory Commission, led by their president, Pat Wood, which regulates energy in America, refuse to intervene.