Fraud detection in accounting Essay Example | Topics and Well Written Essays - 2750 words

Fraud detection in accounting - Essay Example While the company grew rapidly through the 1990s, some of the worst manifestations of its culture -- obsessions with bonuses, the stock price and exotic accounting -- were also growing, and out of controlThough the corporation's character flaws can be traced to its earliest days, they flourished under top executive Jeff Skilling. He didn't act in a vacuum. Enron had a distracted, hands-off chairman, a compliant board of directors and an impotent staff of accountants, auditors and lawyers. But it was Skilling's relentless push for creativity and competitiveness that fostered a growth-at-any-cost culture, drowning out voices of caution and overriding all checks and balances." (Fowler, 2005) Enron has developed into becoming a part of America's top ten companies in the span of nearly two decades. Their sudden rise to power seemed impossible to many industries in the financial world. However, the scam which brought upon Enron success was discovered.The controversy involving powerful institutions has made an immense impact in the corporate world leading to their downfall and the implementation of stringent laws of the government. Enron and Arthur Andersen faced the collapse of their careers which affected the industry and the birth of the Sarbanes-Oxley Act.The largest bankruptcy in history marked the existence of fraudulent accounting procedures by Enron and Arthur Andersen in 2001. the once blue chip stock ended up to be valued for small meager amounts. Most of Enron's profits were from transactions with controlled limited partnerships which turned into debts that were not reported on its financial statements. The issue or problem that led to the (alleged) violation. Deception was the name of the game for Enron. They concealed their controversial and suspicious dealings and transaction with their growing debt so that they appear debt-free and admirable to stockholders and the public. At last, every lie and cover up was made known to many when the company suddenly and unexpectedly filed for Chapter 11 Bankruptcy. That was their last resort. Not even company partnerships and affiliations could save the money and the glory of Enron. When the news of bankruptcy of Enron was revealed, the reasons behind Enron's downfall remained unclear and uncertain. There were mixed reactions among businessmen, politicians, stockholders and others. Most of them were enraged while some felt concerned. There were those who were not surprise that the discrepancies with the financial statements could actually happen. It was as if it was the common habit among those who wish to decrease their debt. Questions such as the reason behind the downfall as well as the possible ways and means for preventing bankruptcy rose among the interested public. What hindered the company or the government from foreseeing the end of Enron Was there money laundering or fraud behind the scandal If there was, has the laws implemented by the government sufficient to verify the financial records of Enron Management's involvement in the alleged violation. To shed light on the Enron controversy, a whistleblower, Sherron Watkins, decided to confess all the financial secrets of the company. The government took its role by initiating an investigation powered up by some of the congressional committees. Aside from Watkins, other key players admitted their involvement and decided to testify while some still pleads not guilty. The involvement of an accounting firm as reputable as Arthur Andersen with the controversy, heightened the interest of the public as well as legislators, economists and politicians. The firm also experienced a great loss even though the verdict has not yet been announced. Their clients retracted their loyalty and shifted to other competitive firms. Some employees resigned and sought other jobs from other companies. The accounting firm did a great job on the falsification and manipulation of Enron's financial statements that the discrepa