My accounting teacher was telling us about this revised accounting system because of a company namend "enron"?

im a freshmen and my college professor in acocunting told us to forget about everything that we learned in our high school accounting because there is a new method of accounting. And my teacher told me that it was caused by this enron? what happened in this "enron?" and what changed from the old accounting system to the new one?

at blah's answer, its very simple really, they revised the accounting system so that incident wont happen again. plain and simple

Nothing; the accounting system didn't change. It's still the same. He's just trying to get to your head.

Enron was a big corporation that failed because it's heads were stealing money from it. But it didn't effect the accounting system.

You honestly think that all 5million + accountants would change the system they were taught when they were college students?! the system is still uniform.

Enron was an oil company based in Houston, Texas. Due (among other things) to their accounting practices, MANY employees lost their life savings, pensions, etc., when the company went into bankruptcy. It was a huge scandal, and doubtless caused many changes to generally accepted accounting practices.

Since you are in a class, and since this happened several years ago, when you were much younger, you might want to ask your professor to tell you more about Enron. Part of his/her job is to teach you about this kind of thing, and he/she may not realize how young you and your classmates were when it all occurred.

Accounting didn't really change. A company's obligation to assert that their internal controls are adequate did change. They need to prove to the auditors that the internal control structure would in all likelihood prevent any material financial misstatement, with stiffer penalities on the execs if it did fail. The auditors' obligations really changed. The legislation, Sarbanes-Oxley, required additional and more detailed testing of internal controls during the audit engagment. This was all done to reestablish confidence in the financial markets after the Enron and Worldcomm scandals. Accounting and reporting itself DID NOT change, only assertions about internal controls and the scope of the audit did. If your teacher says otheriwise, I think your teacher sucks and you should show him this answer.

The methods and rules of accounting change all the time when the Financial Accounting Standards Board (FASB) puts out new rules, etc. However, the general principles about accounting have not radically changed after Enron.

Probably th e biggest change that came about was the Sarbanes Oxley Act (SOX) which was passed in response to all the accounting scandles around that time.

What SOX did was require the top executives to certify that their financial statements are not materially misstated.

In addition, as previously stated, the management has to attest to the effectiveness of their internal controls. When doing an audit, the audit staff not only has to do a normal financial statement audit but also has to attest to managements ascertaion that their internal controls are strong

This new SOX law has been a headache for businesses. A couple old accounting professors of mine did a study and found that audit fees went up tremendously since it was implemented.

Now, accounting as we know it may change here in the future if the rule making bodies get their way. FASB along with the International Accounting Standards Board (IASB) are proposing a radical shift in the way the financial statements are presented, how income is presented, etc.

The IASB and FASB want to seperate the balance sheet and Income statement into seperate Operating, Financing and Investing sections. For the Income Statement, there would be no "bottom line" (net income). The Balance Sheet would have to lose its trademark Assets = Liabilities + Equity.

They want to do this in that GAAP (what these people for the most part set) aims to help investors, creditors and others assess the amounts timings and uncertainties of future cash flows. FASB and ISAB are arguing that the information would be more useful by changing it as such.

But what history has told from some rule proposals, this probably won't happen soon or all at once. Congress at least in the US has the ultimate authority over accounting rules.

Back a few years ago, FASB tried to change the stock option expensing rules. This met extreme pressure and FASB eventually had to back off when Congress threatened to pass legislation to stop FASB from making the change.

In one of my accounting courses, my professor showed me a video of Silicon Valley actually having a pep ralley against the new proposed stock option rules. It was crazy and funny at the same time.

Anyways, I hope this long, tangential answer helped.