American Accounting Scandals Essay Example | Topics and Well Written Essays - 2500 words

American Accounting Scandals - Essay Example55, 2009). Interestingly, this is not the first time in the register of United States that its explanation practices, approaches and system has received criticism and strict scrutiny from its stakeholders. After the bankruptcy of Enron and WorldCom in 2001 and 2003, respectively that was also the biggest accounting scandals of their time, the US accounting practices made the headlines all over the world (Ketz, pp. 234, 2003). This constitution is an attempt to explore the accounting standards whether they are too flexible or too rigid. The discussion would allow looking over the causes of Enrons bankruptcy rooted in its accounting problem, debate between rules ground accounting and principles based accounting and the problems with the possible convergence of accounting standards all over the world. ... 144, 2006). Non-transparent and unethical accounting was the most important cause attributed to the failure and downfall of Enron. In t he year 2004, McLean wrote Enron scandal that, The Enron scandal grew tabu of a steady accumulation of habits and values and actions that began years before and finally spiraled out of control (Silverstone & Sheetz, pp. 22, 2007). Furthermore, some other writer in an attempt to explain these habits and values wrote that, the primary motivations for Enrons accounting and financial transactions count to have been to keep reported income and reported cash flow up, asset values expositd, and liabilities off the books. (Duska, Duska, & Ragatz, pp. 74-75, 2011) Without each doubts, Enron had some of the smartest minds in the confederation, as its executives and accountants, who were spot on in tweaking and twisting, the accounting laws to their advantages (Rapoport & Dharan, pp. 106, 2004). They used off offset sheet vehicles, complex financial structures and others to hide their debts and inflate their incomes. Furthermore, the mark to market accounting further allowed the comp any (prenominal) to manipulate its financial figures for deceiving the shareholders, creditors and other stakeholders. More importantly, Enron used the ambiguities and gaps in the mark to market accounting to inflate its income (Rezaee, pp. 175, 176, 2002 Mulford & Comiskey, pp. 44-46, 2005). Mark to Market accounting rule requires showing the net present value of the cash flows from any long-term project and adjust the values of market assets according to the current market value. However, the problem with this method is that under certain situations and for certain projects, correct, accurate, and timely predictions about their future