Accounting Theory Essay Example | Topics and Well Written Essays - 4000 words

accounting Theory - Essay ExampleThere were implications of the non working of the capital market to reflect the different factors that could chip in brought the prices of Enrons stock price. This could be dramatized in the loss to trust of the investors in the reliability of the financial teaching of all other companies which are listed in the stock exchanges. This fact was confirmed by surveys.It was found overly that there are kinds of asymmetry of information which may prevent the efficient operation of capital markets. It could be the moral hazard type and the adverse selection type, which were both analyzed to have caused the demise of Enron. It was besides further found that there could be perspectives in the choice of accounting policy that could affect the precise life or the probability of success of a corporation. One is under the efficient perspective of convinced(p) accounting theory where management would be encouraged to works first for the firm and the stockhol ders before their own. such perspective has also its grounding in cost effective accounting system that would promote right with the companionships assets. On the other hand there is the other perspective, which is called opportunistic perspective affirmatory accounting theory. It was found theoretically that the efficiency perspective was the very opposite of the opportunistic perspective and whence its adoption could actually prevent the operation of the latter. What happened then in the Enron was that there was the adoption of the opportunistic perspective. such(prenominal) adoption was evidenced in the design of the compensation system of the company executives as well as in the retirement system of the employees. Enron was virtually under a situation where the executives will have to get hold of committing fraud or taking risk because of their (executives) tendency to rather make themselves rich before the company under the opportunistic perspective of accounting theory.A t the last part of the paper, Enron