“Bigger Than Enron”, PBS Frontline, 2002
Name: ______________________
Bigger Than Enron
Name two of the five “watchdogs” that were discussed.
1.
2.
By law, accountants have responsibility to ensure what?
Executives in Enron pumped up stock prices and keep money through
______________.
Stock options were a hidden cost that never showed up on what financial
statement? ____________________
What is FASB set up to do?
Why did corporate America not want FASB to require stock options to be
listed on financial reports?
What were the lobbying efforts trying to do?
The Senate passed a resolution condemning the FASB proposal by a vote
of ______to______.
Why was the vote so “lopsided”?
Why should accounting standards not be moved into political or
commercial environment?
How did Sunbeam commit fraud?
According to Jim Chanos, Wall Street investment manager, how do
managements get their way?
What is “torte reform”?
How did it finally pass?
How many companies in the 1990’s had to correct financial reports that
were “just plain wrong”? __________
What accounting “gimmick” did Waste Management use to make Wall
Street think the company was still growing?
By how much money did the company exaggerate its earnings by?
What was the “long-running” cover-up that Arthur Anderson allowed?
In the late 1990’s big firms turned to “consulting”. Why is it considered a
conflict of interest to have the big firms providing consulting services?
What agency gave in to trying to stop outside consulting by the auditing
firms?
Why was Bass removed from the Enron Account?
How much money would Arthur Anderson stand to lose if they gave up
Enron’s account?
By how much money did Enron’s financial statements need to be corrected
by?
According to Alan Greenspan, if there is one thing to learn from Enron he
would do what?
Does the current SEC Chair, Harvey Pitt agree?
KEY KEY KEY KEY KEY KEY KEY KEY
Bigger than Enron
Name two of the five “watchdogs” that were discussed .
1. Stock analysts, 2. lawyers, 3. bankers, 4. SEC, 5. accountants
By law, accounts have responsibility to ensure what?
That the financial reports are honest.
Executives in Enron pumped up stock prices and keep money through
stock options.
Stock options were a hidden cost that never showed up on what financial
statement? Balance Sheet
What is FASB set up to do?
Set accounting standards; tried to close the options loophole
Why did corporate America not want FASB to require stock options to be
listed on financial reports?
“would be devastating to the bottom line at many companies”
What were the lobbying efforts trying to do?
Protect CEO’s pay packages
The Senate passed a resolution condemning the FASB proposal by a vote
of 88 to 9.
Why was the vote so “lopsided”?
campaign contributions
Why should accounting standards not be moved into political or
commercial environment?
Loss of control of whether standards are the “best” standards.
How did Sunbeam commit fraud?
They did not properly disclose “future sales”; used “paper sales”
According to Jim Chanos, Wall Street investment manager, how do
managements get their way?
They payoff the watchdogs; conflict of interest due to who pays who
What is “torte reform”? Limits damages; stops lawsuits from investors
How did it finally pass? House and Senate passed; Clinton vetoed;
Overturned
How many companies in the 1990’s had to correct financial reports that
were “just plain wrong”? 700
What accounting “gimmick” did Waste Management use to make Wall
Street think the company was still growing?
Stretched out depreciation on company assets.
By how much money did the company exaggerate its earnings by?
$1.7 Billion
What was the “long-running” cover-up that Arthur Anderson allowed?
Allowed companies to publish financials knowing there were mistakes as
long as the company would correct them in the future.
In the late 1990’s big firms turned to “consulting”. Why is it considered a
conflict of interest to have the big firms providing consulting services?
Lose big clients if the audit report were bad.
What agency gave in to trying to stop outside consulting by the auditing
firms? SEC
Why was Bass removed from the Enron Account?
Tried to uphold accounting standards with strict audits.
How much money would Arthur Anderson stand to lose if they gave up
Enron’s account?
100 million dollars per year
By how much money did Enron’s financial statements need to be corrected
by?
1.2 billion dollars
According to Alan Greenspan, if there is one thing to learn from Enron he
would do what? Expend stock options
Does the current SEC Chair, Harvey Pitt agree? No