Much of the controversy surrounding the Enron scandal centered on the use of special purpose entities by Enron management. Briefly explain what a special purpose entity is and identify two ways in which Enron abused the accounting rules for SPEs
A special purpose entity (SPE) is a thinly capitalized entity created by an existing company (the transferor) as an entity into which certain assets or liabilities of the transferor are placed for some specific reason (e.g., outsourcing of certain services). A major issue related to SPEs is whether the transferor retains control over the assets or responsibility for the liabilities and should therefore be required to include the assets or liabilities of the SPE in its (the transferor's) financial statements. Substantive equity investments by entities or individuals other than the transferor would suggest that an SPE is independent of the transferor. An SPE must be independent from the transferor or the SPE must be included in the financial statements of the transferor.
Enron violated the concept of an independent SPE in two ways. First, a number of Enron's SPEs were not independent from Enron. High-ranking executives of Enron owned and managed many of the SPEs. Second, the transactions between Enron and many of its SPEs suggested that the SPEs were created by the management of Enron specifically for the purpose of engaging in transactions that were deceptive, illegal, or both.
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Answer the following statement true (T) or false (F)
________ involves describing one's position in ways that identify common ground and establish a collaborative tone.
A. Norming B. Framing for common ground C. Self-serving D. Stereotyping
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a. A chi-square test b. A test of proportions c. Kruskal-Wallis test d. Wilcoxon rank sum test