Read and respond to ATC 7-7 on page 285. This situation is similar to the Enron scandal from several years ago. Use the Ashford Online Library to research Enron accounting procedures. In your post, discuss how these accounting procedures affected the company and stockholders. You must respond to at least two of your classmates' postings to receive full credit.
a. How did David’s scheme affect the overall appearance of Global’s financial statements? Why was this important to investors and creditors?
b. Review the AICPA’s Articles of Professional Conduct (see Chapter 1) and comment on any of the standards that have been violated.
c. Name the features of the fraud triangle and explain how they materialize in this case.
How did David’s scheme affect the overall appearance of Global’s financial statements? Why was this important to investors and creditors?
David Sheridan provided statements that did not reflect Global’s current financial situation which mislead creditors and investors. Borrowing more money would have indicated that the business was in the process of losing assets which would cause stakeholders withdraw and to discontinue investing with the company. This is similar to the Enron scandal, which greatly affected stakeholders not only financially but also morally. According the American journal of business (2006), “Enron’s top managers chose stakeholder deception and short-term financial gains for themselves, which destroyed their personal and business reputations and their social standing”. After reviewing the AICPA’s Articles of Professional Conduct, I believe that David violated Article I and III. According to Edmonds, T. (2010), Article I Responsibilities-
“In carrying out their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities”.
Article III Integrity-
“To maintain and broaden public confidence, members should perform all professional... [continues]
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