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Essay / Research Paper Abstract
This 5-page paper discusses uses of accounting gimmicks. Bibliography lists 4 sources.
Page Count:
5 pages (~225 words per page)
File: AS43_MTpromaxac.doc
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listed below. Citation styles constantly change, and these examples may not contain the most recent updates. PROFIT MAXIMIZATION AND ACCOUNTING GIMMICKS Research Compiled
by 9/2010 Please In
late 2001, when the former "new economy" giant Enron was imploding, it was found that its internal financial staff relied on special purpose entities to hide a boatload of debt,
while auditor Arthur Andersen looked the other way. The special purpose entity, or SPE (or special purpose vehicle, as its sometimes called) isnt illegal in and of itself; its defined
as an entity that has the sole goal of acquiring or financing specific assets (Special Purpose Vehicle/Entity). Theyre used to help isolate financial risk, by allowing a company to finance
a large project without putting that entire company at risk (Special Purpose Vehicle/Entity). But back in 2001, Enron used SPEs to hide a bunch of its debt, thereby showing huge
revenues on its balance sheet while hiding even large amounts of debt within these SPEs. But all that is behind us now,
isnt it? Dont the Sarbanes-Oxley Act and more oversight on the part of auditors and accountants mean that accounting gimmicks to show excess revenue are in decline? Well, not really.
So long as Wall Street and investors demand more bank for the buck (and more buck for the buck), accountants will continue finding different loopholes and gimmicks to help pad
a corporations bottom line. In fact, examiners point out that Lehman Brothers Holdings Inc. used a variety of accounting gimmicks - and, in fact, had been insolvent for weeks -
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