Economics Homework Help

“Enron of Saudi Arabia: Corporate Accounting and Auditing Failures”

– Ayman Mohamed Zerban

Accounting Department, College of Business Administration, University of Business and Technology, Jeddah, Saudi Arabia

Article: https://www.scirp.org/pdf/OJAcct_2017111715153275….

Key Points in the Article:

The
effects of misleading financial information are tremendous. In Saudi
Arabia, MMG (Mohammad Al Mojil Group) stock was offered in stock market
at 20 dollars and few years later it is 30 cents while Etihad Etisalat,
known as (Mobily) was nearly 20 dollars in 2012 and it reaches nearly
5.3 dollars on 12th January 2017. Managers sometimes try to get maximum
benefits by presenting false information related to the financial
performance and financial position of companies.

Recently
scandals shed lights about the applications of corporate governance
rules and whether accounting is a tool for decision making that help
investors or it is enhancing greed of management by presenting
misleading financial numbers. Fraudulent financial information can
impact users of financial information to make wrong financial decisions.

The
devastating results of Enron’s improprieties affected employees’ jobs,
retirement funds as well as complete destruction of share values.
Subsequently, the former Treasurer, Ben Glisan, pled guilty to criminal
conspiracy and for which he received a prison sentence (Enron, 2006).
Mr. Fastow, CFO, also pled guild to “fraud, money-laundering and
conspiracy” for which he received a 10-year prison sentence and was
forced to pay $24 million. Roughly twenty other Enron executives have
been charged with felonies including Kenneth Lay, former CEO.

Corporate financial scandals have negative impact on the value of organizations that are committing fraud.

Questions: 3 Marks

The
Author states “Strengthening corporate governance as well as more
restriction to managers will help in regaining confidence of
stakeholders”.

1. As a manager do you agree with the above statement? Why?
2. Explain why ethics is an appropriate topic in the study of corporate finance?