Question

How did many investors, analysts banks, and other institutions miss Enron's deceptive practices on their financial statement?

Answer 1

Many investors along with analyst banks and other institution Miss Enron deceptive practices on their financial statement because Enron was in Nexus with the accounting firm Arthur Andersen which was accountable for auditing the company and it was trying to engage into manipulative practices which were performed by Arthur induction and they were trying to always hide their liabilities and their estimated their income in advance through mark-to-market.

Enron was energy Company which had large number of receivables through outstanding debtors and other outstanding receivables so they used to include those receivables in the books of accounts in advance by adaptation of the mark to market policies and they always tried to inflate their receivables so their books of accounts started to look very strong and that was approved by the accounting firm Arthur andersen so the investors were highly believing upon the annual reports and the financial investments and these business analysts were also not able to detect the deceptive policies which were adopted by the company in order to include the books of the accounts so it was a Nexus made between the the company and accounting firm in order to to defraud the investor and attract a higher valuation in the market.