While there have been a significant number of financial scandals and audit failures since the 1930’s, the
Equity Funding Corporation of America (Equity Funding and Enron Corporation (Enron) financial scandals had by far the most pervasive ramifications on the investing public, management, employees and the
auditing profession. While the investing public and employees suffered significant losses to their wealth
including 401K plans (Enron), the implications upon the corporate community and auditing profession were
significant and resulted in the Sarbanes/Oxley Act.
The purpose of the paper on Equity Funding/Enron is to provide students with an understanding of the
underlying causes of the financial scandals of Equity Funding and Enron. Accordingly, the paper should
address, at least the following factors: (1) the environment in which these scandals happened (e.g., the
stock market); (2) management and company culture; (3) similarities of underlying management motives to
commit the scandals; (4) resulting legislation (if any); and (5) the impact of these scandals on the internal
and external auditing profession; changes in auditing standards (if any); changes to audit firm structures (if
any); and changes in way audit firms are regulated; (6) impact on corporate governance and SEC reporting
requirements.
The paper should be at least six pages, but no longer than eight pages with the following sections: (1)
Overview Summary of the paper; (2) Equity Funding; (3) Enron; (4) Corporate and auditing responses to the
scandals and resulting legislation; (5) Congressional response to scandals; and Conclusions (student’s
observations of the underlying causes of these financial scandals and whether the response by the
corporate community and auditing profession, firms and Congress was appropriate). The student’s reference citations should be listed where appropriate within the paper and a list of citations included as a separate page to the paper (this page is in addition to the six pages required for the paper).
E a c h p a g e s h o u l d b e d o u b l e-s p a c e d , u s i n g a 1 2-p o i n t T i m e s N e w R o m an f o n t , w i t h o n e i n c h m ar g i n s f o r t h e t o p ,b o t t o m an d s i d e o f t h e p a g e , w i t h a mi n i m u m o f s i x f u l l p a g e s . I f t h e p a p e r i s n o l o n g e r t h an s i x p a g e s . Reference citations should comply with the American Accounting Association Accounting Review Editorial and Grammar Guidance (including citations). A copy of this guide is included under Course
Content.
A video on Enron entitled, E n r o n : T h e S ma r t es t G u y s i n t h e R o o m , provides an overview of the financial scandal.
The link to the video is: h t t p : / / d o c u m e n t ar y-m o vi e .c o m / e n r o n-t h e-s m ar t e s t- g u ys-i n-t h e-r o o m / .
T h e vi d eo i s r a t ed “ R” b ec a u s e i t c o n t a i n s s o me n u d i t y a n d p r o f a n i t y . I f ei t h er o f t h es e ma t t er s w o u l d o f f en d y o u , p l ea s e s en d me a n ema i l t o i n f o rm me y o u w i l l n o t vi ew t h e vi d eo b ec a u s e o f t h e n a t u r e o f t h e
c o n t en t c o n t a i n ed i n t h e vi d eo .
While this video provides the bases of the Enron financial scandal, there are other videos available should a student wish to view an alternative video.
T h e B i l l i o n D o l l a r B u b b l e provides background on the Equity Funding Corporation of America.
It may be
found at https://www.youtube.com/watchv=tIIo4_-jxY4&t=5s
Additional material on these financial frauds are provided in Course Content under their respective names.
While you are provided with this additional material, you can conduct additional research for your paper.