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Forensic Accounting, Forensic Techniques, and Fraud Detection Copyrighted 2001 D. Larry Crumbley, ... - page 211 / 352

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© D.L. Crumbley

Enron’s management figured an ingenious method of overriding the double-entry system of accountancy. They simply ignored it.

It remains the simplest, most elegant financial fraud. Enron created special-purpose entities (SPEs) and pledged Enron stock—just pieces of paper.

If the SPE was successful, they recognized income.

Debts in the partnerships were kept off the Enron balance sheet.

When the SPE had huge losses, they issued more paper. Debts were held off-balance sheet in the partnerships.

Source: Joe Anastasi, The New Forensics, John Wiley & Sons, 2003, p. 91

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