Exhibit 5.23 presents selected financial statement data for Enron Corporation for 1997, 1998, 1999, and 2000. These data reflect amounts from the financial statements as originally reported for each year. In 2001, Enron restated its financial statements for earlier years because it reported several items beyond the limits of GAAP.
Required
a. Use Beneish's earnings manipulation model to compute the probability that Enron engaged in earnings manipulation for 1998, 1999, and 2000.
b. Identify the major reasons for the changes in the probability of earnings manipulation during the three-year period.