One Way Enron Manipulated Its Financial Statements Was to Sell

question 95

Multiple Choice

One way Enron manipulated its financial statements was to sell assets at inflated prices to other firms, while giving a promise to buy back those assets at a later date. The incoming cash was recorded as revenue, but the promise to buy back the assets was not disclosed. Which of the following is one of the ways that such a transaction is deceptive?

• A) The assets should have been listed on the balance sheet as long-term assets.
• B) Cash raised by selling assets should not be recorded as revenue.
• C) The off-balance sheet promises to repurchase assets should have been disclosed in management discussion and analysis (MD&A) or notes to the financial statement.
• D) Both B and C are deceptive.

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Definitions:

Retroactive Interference

A memory phenomenon where new information hinders the ability to recall older information.

Mnemonic Device

A technique or strategy used to enhance memory and learning ability by organizing information into more familiar or simpler forms, often using patterns of letters, ideas, or associations.

Hypnotic Trance

A deeply relaxed and suggestible state of mind, achieved through hypnosis, where conscious awareness is reduced.

Persuade People

The act of convincing individuals to change their beliefs, attitudes, or behaviors through argument, reasoning, or appeal.