 DECEPTIVE ACCOUNTING AND FINANCE STRATEGIES AND FAULTY

FINANCIAL REPORTING
o Enron's misleading financial statements, which were purposefully created to
depict it successful despite though it had millions of dollars in debt and losses,
were the primary factor in its demise. They were presented in such a way as to
mislead, perplex, and obscure the true cash flow, profit, and financial status of the
corporation from their readers. Jeffrey Skilling and Andrew Fastow were the
masterminds behind it, using such accounting techniques that would misinform
and deceive anyone attempting to examine Enron's financial statements.
Primary accounting vehicles used by Enron were:
 Mark-to-market Accounting - Enron used the Mark-to-market
accounting system for record keeping and reporting, which
allowed it to purposefully make its financial statements extremely
complex and difficult to comprehend. Mark-to-market is a measure
of the fair value of accounts which means that whether or not such
prospective initiatives will be successful in the future, this
accounting system enables its anticipated future earnings and
unrealized earnings to be recognized in the current earnings.
However, Enron took advantage of this chance and included such
unrealized gains as its current earnings in its financial statements,
so projecting deceptive big profits. Also, ENRON used it to hide
its losses and make the company appear to have good financial
health. Under the Mark-to-market accounting methodology,
significant manipulation was carried out in this area to deceive the
stakeholders.
 Special Purpose Entities (SPEs) - Troubled operations of the
company were transferred to so-called special purpose entities
(SPEs), which are essentially limited partnerships established with
outside parties. Although many companies distributed assets to
SPEs, Enron abused the practice by using SPEs as dump sites for
its troubled assets. Transferring those assets to SPEs meant that
they were kept off Enron’s books, making its losses look less
severe than they really were.