ACC 492 Case 4.1 Enron Corporation and Andersen, LLP

May 5th, 2015
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ACC 492 Case 4.1 Enron Corporation and Andersen, LLPUniversity of PhoenixACC 492Case 4.1 Enron Corporation and Andersen, LLPWhat were the business risks Enron faced, and how did those risks increase the likelihood of material misstatement in Enrons financial statements?Enrons business risks involved risks such as fraud; however, their ultimate failure was when they entered into aggressive transactions involving special purpose entities (SPEs). The problem was that the accounting practices were questionable when they treated loans to look like revenue and did not record them as liabilities, such as notes payable. This risk is that they did not show the liabilities on the financial statements and misled creditors, investors, and customers into believing that they were making more money then they actually were. Another business risk Enron faced was losing all their investors as they continued to cash in their shares of Enron stock. In the same year, the CEO at the time Jeffrey Skilling resigned from his short career at Enron. The company lost a great amount of their reputation and public trust due to all the bad publicity they received in the media, all of this created a weak future as they encountered a liquidity crisis later in 2001. Other business risks involved bad management decisions and practices.2. What are the responsibilities of a companys board of directors? Could the board of directors at Enron especially the audit committee h

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