The Enron scandal and financial fraud in American business

Financial Fraud

What is financial fraud?

Identifying Fraud

Effect on Economy

Are we Protected?

Identity Theft in Business

Enron Scandel

Loss Prevention Planning and Strategies

Financial Fraud

Financial fraud was an unfamiliar notion prior to the 2000's, but has become a controversial and familiar term due to economic woes, public disapproval and revamped financial regulations. Light was shed on some of America's top organizations intentionally changing their accounting books to look more attractive to investors than they were in actuality. Institutions and/or ranking officials at institutions were falsely publishing financial statements with fabricated values and profits presenting the illusion that investments with these entities were producing and would continue to produce consistent returns. In addition to recurring fraudulent activity, new highs for deposits of fraudulent checks were recorded by banks nationwide.

Government agencies aim to set regulations, enforce regulations, and protect American businesses and consumers from fraudulent activity. Laws are set in place to protect against fraudulent activity of all kinds, ranging from check fraud to altering and tampering of financial statements. Financial fraud is everywhere that individual's lack moral and ethical responsibility and as an American citizen it is important to understand financial fraud, examples of financial fraud and how to protect and stay away from financial fraud.

What is financial fraud?

Finding out the definition of fraud is very important. What is financial fraud? Financial fraud is considered to be a situation in which the ethical and legal management of financial resources is not occurring. In many nations all over around the world, this kind of fraud takes place by reason of measured decisions and actions made by individuals who are managing most of the money and not to mention the other assets on behalf of clients or employers. Accounts Payables and Receivables are purposely changed in order to hide the fact that monies taken in by the corporation are abstracted for the personal use of someone that is involved in the accounting procedure. In some circumstances, two sets of accounting records could possibly be preserved.

Research shows that what happens is that one set is a true and correct accounting, although the other is the changed accounting that can be utilized to turn away suspicion of some type of illegal activity. (Elliott, 2013) With that said, financial fraud is an activity that can occur to anyone who has money. Most people, right away would think about big organizations and the guys taking millions and millions of dollars, but at the same time, research shows that there is way more circumstances with the average American. Further investigations shows that America was and still is a nation that has made it so easy since most people do things by using a lot of credit. Inferred is a precondition knowledge that the funds are obtainable. This is something that goes on every day and many in business are not aware of it. Then once the objective is done they will be able to just bail from the situation.

Identifying Fraud

The hard part is recognizing fraud. It is difficult if companies have accounting records that are lengthy. "The financial loss is from time to time wisely hidden in the accounting records that are being utilized when it comes to tracking activity consisting of the resources, permitting it to last until a great deal of money and other properties are drawn off and no longer in the control of the proprietor. Business fraud of this kind could be directed by any employee or company officer who has admission to corporate resources, and may carry on for a lengthy length of time before turning out to be apparent. (Yallapragada, 2013) As a result it is vital to be cautious in this odd economy with the selections you make concerning a person money. Almost everyone wants a person's hard earned money and some are just lying in order to get it. However, this is not to say that every business is immoral but nevertheless in this day in age people need to be very cautious and make intelligent choices with the money they use. It is obvious that the government has a lot of agencies and new laws in order for them to keep up and enforce financial fraud.

Recognizing Theft in Business

What is considered to be identity theft? As stated by the World English Dictionary, identity theft is when a person choses to take on the identity of another person by utilizing their personal documents or data in order to get a hold of some money or even be able to get some credit without that person's information (Laufer, 2011). Nevertheless, business identity theft is the criminal act of robbing the business's name, altering registration history and starting credit with that name for the use of buying items that may be bought or swapped for cash. Many businesses are unaware that this kind of identity theft is able to have some kind of a domino effect and then a break down of an entire business, in addition to, any financial institutions and retailers that are taking part in any form of business transaction with this type of entity.

It can outcome in the obliteration of the company's status, their future credit relationship with retailers and banks, operational issues, workers and even the customers, not to mention the quantity of money and the time it could take to repair the injuries (Yallapragada, 2013). In 2012, close to 3,000 corporate administrators were targeted in an email scam that had a list of names of all the top managers, along with their phone numbers and their organization name mentioning that they were being order to come to court for some sort of legal violations that were taking place against their business.

The email made it necessary for the recipient to be able to just click the link in order for it to install an add-on in order to view the summons to court. By approving to the add-on endorsed admission of software that could steal passwords and usernames when online banking and other programs that required executive credentials were visited (Laufer, 2011). Enron's accounting pattern and Madoff/Ponzi investment scams are only a few of the business scandals that have had a huge effect on the corporate executives.

Enron Scandal:

One huge business fraud involved Enron. It was obvious that the Enron scandal was a corporate scandal relating the American energy corporation. Enron Business based in Houston, Texas and the auditing, consultancy and accounting firm Arthur Andersen that was exposed in October 2001 (Laufer, 2011). All of this took place when there was a gap that was found out in the accounting department when they were permitted to book large sums of money from energy-derivative agreements at their unpolished worth and not their net worth. This tactic even though legal numerous specialists and investors saw what was taken place in Enron. This was called the misrepresenting method which permitted Enron to turn out to be one of the major corporations in the world.

Now, in 2002, there were reports that were starting to come out in regards to Enron's illegal behavior. Everyone started thinking at the time that the Bush administration was being accurate concerning what was going on at the company. Now that Enron is broke, several still have this notion that there was ever any crime at Enron. Although the American people thought nothing actually went down, the Enron managers had to have done something wrong for the business to just fall apart.

Even though numerous think that leadership was inattentive from the executives attentions at Enron, the results regularly lacked morality, honesty, and that it was not their fault, the administrators came out and alleged that they did not recognize the accounting practices that were taking place at Enron.

In the end, it appeared that Enron's style of management was of the controlling style, which does not work in today's society when it comes to business. Enron's problems with fraud are sort of similar to a lot of other businesses today. The gravest concerns to this type of theory are motivation, creativity, and growth, which Enron was never able to develop.

Loss Prevention Planning and Strategies

When a business implements programs that will prevent the loss or theft of money and/or merchandise is called loss prevention (Nikitkov, 2008). Research shows that the loss prevention is something that is necessary in order to protect retailer owners from being attacked with a bunch of shoplifters by positioning special devices on/in goods that will ready management when something is being taken from the store that has not been bought and in the business world it is considered to the robbery of vital financial information or personal worker data, information that is being stored on businesses provided devices that are portable and then being stolen or lost from an employee. In a lot of organizations today there are definite strategies that are being incorporated or put into a loss prevention strategy that may consist of all workers and executives have a level of authorization as to what they are capable of accessing from the business's servers, in addition to producing, enforcing and educating all strategies about the use of exclusive information with workers, not permitting the usage of portable devices, putting in data encoding software so as to prevent someone for reading information that is pertinent, and consider participating in a data loss prevention answer (Elliott, 2013).

Upon service of the business, all workers will be educated of the procedures and policies of the business's fraud rule and so as to keep the organization protected, providing fraud protection seminars on an annual foundation, so that everyone is well-versed and educated of the hazards this crime can have on, not just the company, but the workers and consumers too. With this training a fraud examiner that is certified would be on-sight with professional advice and learning materials as to prevention steps. Also, several groups of workers will be programmed to be present at the required classes, be tested on what they learned and then sign a confidentiality contract that they fully understand all the risks and penalties if any procedures are broken.

Conclusion

It is clear that when it comes down to business, fraud it something that needs to looked at seriously. As the paper just stated, many companies have suffered because there were not any strong polices set in place to prevent. The paper made it clear that companies to implement some prevention programs in their businesses in order to prevent the crime from taken place. This appears to be important since many are unaware of what to look for when it comes to this crime.