Accounting Fraud: Case Study

Abstract

This paper aims to be a qualitative research, respectively a case study. I will analyze two famous cases of accounting fraud: Enron and Lehman Brothers. The analysis considers the techniques used to manipulate the result, the accounting fraud, the causes, the effects, the people involved and the sanctions applied. Although they occurred at different points in time, both have gone down in history as accounting manipulations with a significant economic impact and showed the failure of supervisors. Enron took advantage of accounting policies that allowed the creation of special purpose entities to hide off-balance sheet debts and losses. Lehman Brothers profited from the use of Repo 105, which involved a repurchase agreement that abusively allowed loan transactions to be recorded as sales. Both cases ended up being, due to the accounting manipulations used and the economic impact of those manipulations, resounding bankruptcies. UDC: 657.632; JEL: M41