Question

What impacts, if any, do international accounting standards have on the ethics of the Enron scandal (2001)? If not applicable to this case, discuss possible overall impacts of international accounting standards for ethical situations in general.

Answer 1

In Enron case, it was well said that they were following unethical practice of following wrong accounting practices, which is true to the extent as many of the policies they followed are actually allowed under USGAAP and ethically they were just using the loopholes of them. Enron One of many accounting loopholes used by Enron was putting liabilities in subsidiaries that were too small to be required to be consolidated into their financial statements, which is allowed under U.S. GAAP. The problem was Enron created hundreds of them. Many Enron executives went further and committed actual crimes, but the factors that really cost investor's money when the company collapsed were at the time allowed accounting practices. Under IFRS none of those accounting practices would have been allowed under the principles based rules that exist.