Historic example of positive accounting
The Enron scandal is an extreme example of how a company’s management can manipulate accounting practices. Through accounting loopholes and fraud, Enron was able to overstate its earnings, inflate its assets, and hide billions of dollars worth of debt. The energy company pressured its accounting firm, Arthur Andersen, into applying questionable accounting practices and ignoring its financial problems.
Enron filed for bankruptcy in 2001, which was the largest corporate bankruptcy in history at the time, and Arthur Andersen collapsed in 2002. Fortunately, even companies that may employ some positive accounting don’t use the loopholes and fraudulent tactics that Enron did.