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    The Enron Collapse: An Overview of Financial Issues

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    (1) Review at least two company collapses e.g. Lehman Bros., Worldcom., Xerox, Enron with a view to understanding how the companies were given unqualified audit reports, and within a short time were in financial crisis and ultimately ending in collapse. (2) Review any guidance and regulations on auditing complex financial instruments in Australia and internationally. (3) The knowledge base of auditors has traditionally utilized methods of valuing tangible things which could be counted and measured. This paradigm is being eclipsed by complex financial transactions. Given the conventional ...

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    The collapse of Enron Corp. was unexpected and sudden. It was the first in a sequence of many crucial accounting scandals in the corporate world that had shaken the stock market. In December 2001, only a few months prior to their filing of bankruptcy, Enron was regarded as one of the fastest growing corporate houses in the USA. Their annual revenues grew substantially from around $10 billion in the 1990s to $139 billion in 2001. This rise in revenue had put them in the fifth position in the Fortune 500 list. Enron’s main operations in the energy division were doing alright but the problem arose due to their investment in the sophisticated internet and communications businesses, especially the “dot com” investments.Enron foresaw, like many other companies, there the future on the Internet. Enron then invested in the market heavily and took a debt load in order to gain capital for its purchases.In 2000, when the dot com came crashing, the return from these huge investments withered away but the debts remained. They were also facing huge losses in their foreign operations in India, the UK, and South America. Companies losing money after investing somewhere is not something new but the major problem for Enron was that they could not deal with this crisis judiciously. The public accounting statements of the company were not linked to Enron but to their other entities. When this fake story was busted then more than 80% of Enron’s profits had disappeared and the company crumbled. An independent auditor is required to certify the accounting statements of public corporations as per the federal securities law.

    This report aimed to develop a critical understating of the various accounting software by evaluating the cloud-based accounting software in regards to businesses and then suggest the most appropriate accounting software to a chosen company such as Woolworth. The findings of the current report reflected that the company has key activities like manage, organize, maintain its store staff, develop various strategies for the business, billing for their products, maintain their transactions, and records them and handle their conflicts, etc. Similarly, its other activities related to revenue and expenditure cycle also includes sales and purchase related practices. Moreover, some internal controls are found weak in Woolworth due to which company has risks like segregation of duties, major frauds, poor corporate governance, improper monitoring of managerial opportunistic behavior.

    This report aimed to develop a critical understating of the various accounting software by evaluating the cloud-based accounting software in regards to businesses and then suggest the most appropriate accounting software to a chosen company such as Woolworth. The findings of the current report reflected that the company has key activities like manage, organize, maintain its store staff, develop various strategies for the business, billing for their products, maintain their transactions, and records them and handle their conflicts, etc. Similarly, its other activities related to revenue and expenditure cycle also includes sales and purchase related practices. Moreover, some internal controls are found weak in Woolworth due to which company has risks like segregation of duties, major frauds, poor corporate governance, improper monitoring of managerial opportunistic behavior.

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