I have 3 assignment done they are about financial investigation class.

Assignment 1 This week you will begin your Fraud Investigation Project (FIP) by identifying a company to research that has experienced fraudulent activity. Once you select your company you will need to do the following: Write a BRIEF summary (1 page) that describes the company you've chosen for your project. Who are they? What do they do? Generally, what was the fraud committed? Assignment 2 In assignment 1 you were assigned Case Study One. Use this drop box to submit you're assignment. 3 4 5 6 7 Assignment 3 Provide a unique and supported response to each of the questions below. You are encouraged to use other sources besides the textbook. In your submission, please write out the question and provide the response directly afterwards. 1 What qualities would you expect to see in a "virtuous" accountant? 2 Based on your review of ethical theory, what role, if any, does "intention" play in the decision-making process? Choose one ethical system (consequentialism, deontology, virtue ethics, or hedonism) and relate how it applies to the duties and responsibilities of an accountant. Does the fact that revenue recognized prematurely on financial statements will be earned in future periods lessen the severity of such a violation? What about the responsibility of the perpetrator? What are some possible ways to proactively search for revenue-related financial statement fraud schemes? Why do you suspect that revenue-related financial statement fraud schemes are most common and inventory-related fraud schemes are next most common? Describe how deferred revenue can be misused to overstate earnings. 8 Identify two specific changes you would suggest be made to the FrankDodd Act based on the current accounting environment. CASE STUDY FOR ENRON Enron was created in the year 1986 by Ken Lay to capitalize on opportunity he saw arising out of deregulation of natural gas industry in USA. What started as the pipelines company was transformed by the vision of McKinsey consultant, Jeff Skilling, who had an idea of applying models used in financial services industry to the deregulated gas industry. Skilling's vision was to transform Enron into giant, asset-light operation, trading the power generally and for his next target was trading the electricity. Lay was lobbying the Washington hard in order to deregulate the electricity supply and in the anticipation he and Skilling took Enron into California, buying the power plant on the west coast. Till 2000, Enron's reputation was still riding very high and Lay and Skilling were being looked up to as the visionary thinkers and the top business leaders. In the year 2001 it emerged that the Chief Finance Officer had privately made himself rich at Enron's expense with the off-balance sheet vehicles. At this time the dotcom boom ended up suddenly and for Enron, this coincided with international power business going radically wrong, broadband business having to be shut down, water business collapsing and electricity services business getting into serious trouble in California. Enron's share price at this time started to slide and Skilling, appointed Chief Executive Officer in January 2001, he resigned in August. At beginning of December 2001, Enron filed for biggest bankruptcy the USA had yet seen. This took down one of the largest accounting firms in world, Arthur Andersen, which was deemed to have so compromised its professional standards in the dealings with its client Enron that it was in many ways complicit in Enron's criminal behavior. Enron used complex dubious energy trading schemes and dubious accounting schemes whereby they were trying to; Reduce Enron tax payments. Inflating Enron income and profits. Inflating Enron stock price and credit rating. Hiding losses in off balance sheet subsidiaries. Engineering off balance sheet schemes in order to funnel money for themselves friends and relatives. Fraudulently misrepresenting Enron financial condition in public reports. The major weaknesses that led to the loss involved; Lax accounting by Arthur Anderson. Rogue AA auditor who was none other than David Duncan. Enron senior management hiding losses in dubious off balance sheet partnerships. CFO Andrew Fastow for setting up the partnerships. The decision of the court was that CFO Andrew Fastow was jailed for six years. Timothy Belden was put two years on probation. CEO Jeff Skilling was jailed for 24 years which was later reduced by 10 years by a court of law. CEO Kenneth Lay died in 2006 with charges pending. Prevention or detection of the fraud could have been established through the following means. Using gross margin test According to Nugent (2003), gross margin is the net sales minus cost of goods sold and test is a crucial determinant of the business success as it measures the operational efficiency. An increasing gross margin or the converging is an indication of the increasing profitability and operational efficiency (Nugent, 2003).A business will always attempt to achieve highest gross profit margin possible. Low profit margins will be indicator to risk. However, the lower profit margins are more credible when turnover is high. Furthermore, Clayton and Ellison, (2011) also averred that the diverging gross margin can also imply fraudulent activity. Applying Gross Margin Test to the Enron's case, is obvious that Enron's gross margin shows decrease of 52% from 1996 to 1997. It was diverging and indicating the operational inefficiencies (Nugent, 2003). There was an increase of about 4% from 1997 to 1998; a decrease of 2% from year 1998 to 1999; no movement from year 1999 to 2000; and a decrease of 1% from year 2000 to 2001. This means that as at 1997, there was a major sign that Enron was really experiencing serious operational inefficiencies. Also, while annual differences from the year 1998 to 2001 were only the minor. The fact that they were fluctuating each year, down the next and so on, indicates that financial statements were being tampered with; in terms of the items not being reported in correct financial period (Nugent, 2003). It is consequently ostensible that using Gross Margin Test, (Nugent, 2003; Clayton & Ellison, 2011; Obiri, 2011) Enron's fraud could have been detected sooner. Gross margin Decrease/increas e 1997 0% -52% 1998 4% 4% 1999 2% 2% 2000 2% 0% 2001 1% -1% Financial impact of the fraud The company lost more than $60 billion .The bankruptcy of Enron Corporation led to higher wholesale prices for the power and electricity, natural gas and it resulted to the financial distress for the banks and the other firms which also affected the investors. The ethical issues that surrounded those involved in fraudulent activities involve the following: 1. Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships. The conflict for interest can be evidenced from the roles that were played by Arthur Anderson as an auditor but also as a consultant for Enron. 2. Provide constituents with information that is accurate, complete, objective, relevant, timely, and understandable. Routinely disclose information to all relevant constituents, both positive and negative, that is necessary to present an accurate picture of our financial status and to ensure the effective running of our business. This was not the case with Enron whereby there was lack of attention that was shown by the members of the Enron board of directors to the off-books financial entities with which Enron did its business and there was lack of truthfulness by management about the health of the company and its business operations. 3. Comply with rules and regulations of federal, state, provincial, local and national governments, and other appropriate private and public regulatory agencies. Notify the General Auditor at corporate headquarters if the person is aware of any violations of laws or regulations, frauds, or defalcations. In the case of Enron the senior executives believed that Enron should be the best in everything it was doing and hence they were supposed to protect their reputation and their compensation as the most successful and this made them to ignore reporting mistakes that were made. 4. Act in good faith, responsibly, with due care, competence, and diligence, without misrepresenting material facts or allowing my independent judgment to be subordinated. 5. Respect the confidentiality of information acquired in the course of my work except when authorized or otherwise legally obligated to disclose. Confidential information acquired in the course of my work is not used for personal advantage. 6. Share knowledge and maintain skills important and relevant to my constituents' needs. 7. Proactively promote ethical behavior as a responsible partner among peers and subordinates in my work environment and community. Promote and provide a safe environment for subordinates to report unethical/inappropriate behavior or suspected fraud and will not condone or accept any retribution against those subordinates for reporting these activities. 8. Achieve responsible use of and control over all assets and resources employed by or entrusted to me. Recognize my fiduciary duties in the ensuring of effective internal control systems and a control environment necessary to protect those assets and resources employed by or entrusted to me. Notify the General Auditor and Chief Accounting Officer if one is aware of any material weakness in the design or operation of internal controls which could adversely affect the ability to record, process, summarize, and report financial data. In conclusion if Enron could have followed the recommended ethical issues then the company could not have performed badly and gotten into bankruptcy. This is a lesson that was learnt the hard way where the accounting practice has had several regulations to ensure that what they present is right. References Tebogo, B.(2011).Does the Enron Case Study Provide Valuable Lessons in the Early Detection of Corporate Fraud & Failure. McLean, B and Elkin, P, (2004). Smartest Guys in the Room; the Amazing Rise and Scandalous Fall of Enron (2th Edition). Benston, George J. (November 6, 2003). "The Quality of Corporate Financial Statements and Their Auditors before and After Enron" ENRON CASE STUDY Background Enron was created in the year 1986 by Ken Lay to capitalize on opportunity he saw arising out of deregulation of natural gas industry in USA. What started as the pipelines company was transformed by the vision of McKinsey consultant, Jeff Skilling, who had an idea of applying models used in financial services industry to the deregulated gas industry. Skilling's vision was to transform Enron into giant, asset-light operation, trading the power generally and for his next target was trading the electricity. Lay was lobbying the Washington hard in order to deregulate the electricity supply and in the anticipation he and Skilling took Enron into California, buying the power plant on the west coast. Issues that led to down fall of enron Till 2000, Enron's reputation was still riding very high and Lay and Skilling were being looked up to as the visionary thinkers and the top business leaders. In the year 2001 it emerged that the Chief Finance Officer had privately made himself rich at Enron's expense with the off-balance sheet vehicles. At this time the dotcom boom ended up suddenly and for Enron, this coincided with international power business going radically wrong, broadband business having to be shut down, water business collapsing and electricity services business getting into serious trouble in California. Enron's share price at this time started to slide and Skilling, appointed Chief Executive Officer in January 2001, he resigned in August. Facts of the case Enron used complex dubious energy trading schemes and dubious accounting schemes whereby they were trying to; Reduce Enron tax payments. Inflating Enron income and profits. Inflating Enron stock price and credit rating. Hiding losses in off balance sheet subsidiaries. Engineering off balance sheet schemes in order to funnel money for themselves friends and relatives. Fraudulently misrepresenting Enron financial condition in public reports Internal weaknesses Lax accounting by Arthur Anderson. Rogue AA auditor who was none other than David Duncan. Enron senior management hiding losses in dubious off balance sheet partnerships. CFO Andrew Fastow for setting up the partnerships Court decision The decision of the court was that CFO Andrew Fastow was jailed for six years. Timothy Belden was put two years on probation. CEO Jeff Skilling was jailed for 24 years which was later reduced by 10 years by a court of law. CEO Kenneth Lay died in 2006 with charges pending. Fraud detection Using gross margin test Applying Gross Margin Test to the Enron's case, is obvious that Enron's gross margin shows decrease of 52% from 1996 to 1997. It was diverging and indicating the operational inefficiencies (Nugent, 2003). There was an increase of about 4% from 1997 to 1998; a decrease of 2% from year 1998 to 1999; no movement from year 1999 to 2000; and a decrease of 1% from year 2000 to 2001. This means that as at 1997, there was a major sign that Enron was really experiencing serious operational inefficiencies. Also, while annual differences from the year 1998 to 2001 were only the minor. The fact that they were fluctuating each year, down the next and so on, indicates that financial statements were being tampered with; in terms of the items not being reported in correct financial period (Nugent, 2003). It is consequently ostensible that using Representation of gross profit margin Gross Margin Test, (Nugent, 2003; Clayton & Ellison, 2011; Obiri, 2011) Enron's fraud could have been detected sooner. 1997 1998 1999 2000 2001 Gross margin 0% 4% 2% 2% 1% Decrease/increase -52% 4% 2% 0% -1% Financial impact on fraud The company lost more than $60 billion .The bankruptcy of Enron Corporation led to higher wholesale prices for the power and electricity, natural gas and it resulted to the financial distress for the banks and the other firms which also affected the investors. Ethical issues Act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships. The conflict for interest can be evidenced from the roles that were played by Arthur Anderson as an auditor but also as a consultant for Enron. Provide constituents with information that is accurate, complete, objective, relevant, timely, and understandable. Routinely disclose information to all relevant constituents, both positive and negative, that is necessary to present an accurate picture of our financial status and to ensure the effective running of our business. This was not the case with Enron whereby there was lack of attention that was shown by the members of the Enron board of directors to the off-books financial entities with which Enron did its business and there was lack of truthfulness by management about the health of the company and its business operations. Continuation Comply with rules and regulations of federal, state, provincial, local and national governments, and other appropriate private and public regulatory agencies. Notify the General Auditor at corporate headquarters if the person is aware of any violations of laws or regulations, frauds, or defalcations. In the case of Enron the senior executives believed that Enron should be the best in everything it was doing and hence they were supposed to protect their reputation and their compensation as the most successful and this made them to ignore reporting mistakes that were made. Act in good faith, responsibly, with due care, competence, and diligence, without misrepresenting material facts or allowing my independent judgment to be subordinated