Question

Where did Enron cross the line?

1) Risk management strategies are to be directed at accounting
2) Risk management strategies are to be directed at economic performance
3) Enron did not cross the line
4) Cannot be determined

Answer 1

The correct answer is 1) Risk management strategies are to be directed at accounting

Step-by-step explanation:

Enron crossed the line when they directed their risk management strategies towards accounting rather than economic performance. They used accounting techniques to manipulate their financial statements, giving a false impression of the company's financial health. Enron's top executives engaged in fraudulent activities such as creating complex off-balance sheet entities and using mark-to-market accounting to inflate their profits.

By focusing on accounting rather than economic performance, Enron violated ethical and legal boundaries. This ultimately led to the company's downfall and bankruptcy.