Fraud

I just had my lesson about "Fraud" last week. As an accounting student, we have to study this chapter in order for us to Identify and Prevent Fraud. This chapter was quite interesting compared to the others because we were exposed to the world of Fraud haha...we learned how people intended to commit fraudulent activites by theft of cash, theft of stock, payroll fraud etc....

One thing interesting that u'll find in my book is this:

Here we consider examples in which the intention is to overstate profits so to.... You should perform this exercise yourself.
a) Over-valution of stock..............

What? u mean we r advised to perform Fraud activities ourselves?! My whole class laughed out loudly. Throughout the lesson I came accross lots of examples and of course, one of the most recent and common one is Enron Corp. and Arthur Andersen's. I wasn't familiar with this at all and when i asked my friend, Yee Piao what is it about and when did it happened, he just said: "That time u were still young. It happened in the late 90's " I was thinking like what? Since it was at the late 90's why would u, a guy who was born in the year of 1990 know this?! Anywayz, i am now reading about this case online so i won be the" Frog who hides underneath the Well".

Firstly, i would like to draw your attention to this company's History.

Enron Corporation, is a defunct American company based in Texas. Enron filed for bankruptcy protection in late 2001(not 1990 something, my fren).Enron employed around 21,000 people and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of $111 billion in 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years. It achieved infamy at the end of 2001, when it was revealed that its reported financial condition was sustained mostly by institutionalized, systematic, and creatively planned accounting with Arthur Andersen accounting firm.

This is the interesting part where u will noe how this Company commit fraudulent activities/ in what ways they do fraud!...haha

As was discovered, many of Enron's 1)recorded assets and profits were inflated, 2) putting debts and losses into entities formed "offshore" that were not consolidated with the company's financial statement and, in addition, by the 3)use of other financial transactions between Enron and related companies formed to take unprofitable entities off the company's books.

Wow, isn't it interesting. Just can't believe this.

This company has a revenue of $111 billion a year, owns and operates 38 electric power plants worldwide and one of it is the largest thermal power plant in Central America. Why would such a wealthy company involved in such irrational activities which will not benefit them in the long run!?