Question

How did Enron's management hide the company's debts and losses?

A. By accurately reporting financial statements

B. Through transparent and ethical accounting practices

C. By engaging in fraudulent activities and off-balance-sheet transactions

D. Through increased shareholder communication

Answer 1

Enron's management concealed debts and losses through fraudulent activities and off-balance-sheet transactions, reflecting a failure in corporate governance.

Step-by-step explanation:

Enron's management hid the company's debts and losses by engaging in fraudulent activities and off-balance-sheet transactions.

They did not uphold transparent and ethical accounting practices; instead, they masked the true financial state of the company, leading to misinformation about Enron's fiscal health. Accurate information was not available in this case, highlighting the failure of corporate governance — institutions responsible for overseeing the actions of top executives as shown in the case of Lehman Brothers.