Unraveling Enron's Complex Accounting Fraud

How Enron was accounting fraud?
At the time, under U.S. GAAP all majorities owned subsidiaries must be consolidated except when the subsidiary is in legal reorganization or bankruptcy or the subsidiary operates under severe foreign restrictions. Enron loophole to seize this one, from operating profits, losses and liabilities were transferred to some obscure related businesses。

1. Set up of SPE
SPEs are commonly used by companies to isolate financial risk, hide debt. Under normal circumstances, the company will transfer assets to the SPE SPE-owned assets management or use of a large-scale project, in order to achieve a series of goals stenosis did not put the entire company at risk. In US GAAP 140 say that a qualifying SPE shall not be consolidated

In March 2001, FORTUNE pointed out that Enron's financial statements were nearly impenetrable. That time, all people began to talking and speculation truth of Enron financial statement. Securities and Exchange Commission also starts to investigation of Enron. At the same time, Andersen destroys Enron audit evidence, eventually also destroy their credibility. They stop to destroy after received the letter of Securities and Exchange

Honestly- means honest and trustworthy. Principle of good faith requires the CPA should be kept positive and honest in all professional relationships and business relationships, impartial, practical and realistic. In the Enron case, it is clear that Enron had serious financial fraud, certified public accountants Arthur Andersen and is clearly aware of the Enron fraud, but not eliminate implicated actively pointed out that instead of helping Enron's financial fraud conduct cover, deceive investors, and ultimately affect the functioning of the financial market policies, and a serious violation of the principle of good faith CPA professional ethics basic