Friday, December 27, 2019

The Enron Scandal Of The United States - 1855 Words

The Enron Scandal is still viewed today as one of the largest corporate bankruptcies in history. The greed that spilled throughout the organization started with gradual disregard for basic accounting principles. Initiated by small discrepancies in the company financial system became extreme financial crimes that left many without jobs and many investors penniless. The Enron scandal led to legislation that tightened restrictions on accounting practices in the U.S. requiring more strict compliance with GAAP. Kenneth Lay founded Enron Corporation in 1985. This new energy company was the result of a merger between the natural gas pipeline companies Houston Natural Gas and InterNorth. Throughout the 1990s the company was viewed as a†¦show more content†¦The internal practices continued in large measure because of improper auditing from accounting firm Arthur Andersen. David B. Duncan, the leading audit partner to Enron, overturned many accounting concerns in the late 1990s such as fake transactions to hide debt and misrepresentation of earnings on financial statements. Enron earned its profits by providing services like wholesale trading and overseeing energy facilities. They adopted the ‘merchant’ model of accounting instead of the ‘agent’ model. Enron was not taking the risk of buying and selling contracts nor were they earning the entire value of these contracts. Enron merely collected a brokerage fee for handling the transaction. However, by using the ‘merchant’ model over the ‘agent’ model, they were able to report the entire value of the contracts they were a part of as earnings. This led to grossly overstated revenues on their balance sheet of over 600 million from 1997 to 2000. To keep up with this bubble of revenue, Enron had to continue to mark up its earnings to outperform past results in order to move their stock price upwards. In 1990, Jeffery Skilling joined Enron and was involved in managem ent. He later became President and COO and by 1997 the only one above him was the founder, Kenneth Lay. Skilling insisted on the trading business using ‘Mark-to-Market’ accounting for their long-term contracts insteadShow MoreRelatedEnron Essay1433 Words   |  6 Pagesthe Causes and Effects of the Enron Accounting Scandals Name: Do Minh Tam Class: MEP 100 Lecture: Karen Bird Date: December 24, 2010 Introduction Background From the 1980s until now, there have been a lot of accounting scandals which were widely announced on by media. The result of this situation is many companies were bankruptcy protection requests, and closing. One of the most widely reported emulation of accounting scandals is Enron Company. Enron Corporation is one of the largestRead MoreJaclyn Givens. Kathy Osburn. Management 101. 5/8/17. The1400 Words   |  6 PagesJaclyn Givens Kathy Osburn Management 101 5/8/17 The Enron Era â€Å"Just as character matters in people, it matters in organizations,† says Justin Schultz, a corporate psychologist in Denver. The Enron scandal had a big exposure in 2001 confirming the big secret to the increase in billions. In July 1985, Enron formed the merger of Houston Natural Gas and Omaha-based Inter North. The Enron corporation was an American energy company based in Houston Texas. The corporation’s catastrophe in 2001 signifiesRead MoreEnron Accounting Scandal1706 Words   |  7 PagesThe Enron Accounting Scandal of 2001 There are many accounting scandals that have occurred throughout United States History. Many scandals occur even without outsiders knowing anything that had occurred. Companies try their best to keep many of the accounting scandals quiet. Everyday, there are political and business fraud happening, and most of it goes unnoticed. No company wants to admit that there was a problem or that people within the company are not trust worthy. However, when executivesRead MoreCorporate Fraud Has Taken The World By Storm For Over The Past Decade1479 Words   |  6 Pagesfraud cases to ever occur was Enron, Bernard Madoff, Lehman Brothers, and Cendant, with Enron being the largest accounting scandal to ever take place. Prior to Enron’s fraud scandal coming to light in 2001, they were the seventh largest company in the United States by revenue, this was the same year Enron filed bankruptcy (da Silveira, 2013, p. 315). In addition to being one of the largest companies, Enron received numerous awards for their positive business role. Enron received the award for beingRead MoreWhat I Learned from Studying the Rise and Fall of Enron693 Words   |  3 Pagesdifferent reasons. Some countries even allow these unethical conducts, such as bribery, as a part of the norm. But for the United States, we have a stricter set of principles in place to try and stop unethical business practices from happening. That doesn’t mean that they don’t happen. Collins discusses a 2009 survey conducted by The Ethics Resource Center on 3,010 employees. Collins states that, â€Å"approximately half of the respondents observed at least one type of major ethical misconduct in the workplaceRead MoreEvents Leading Up to the The Sarbanes-Oxley Act Essay examples1203 Words   |  5 PagesThe Sarbanes-Oxley Act was enacted on July 30, 2002. It was enacted by the 107th United States Congress. It is named after sponsors U.S. Senator Paul Sarbanes and U.S. Representative Michael G. Oxley. It is also known as the ‘Public Company Accounting Reform and Investor Protection Act’ in the Senate and ‘Corporate and Auditing Accountability and Responsibility Act’ in the House. The main purpose of this act was to protect investors by improving the accuracy and reliability of corporate disclosuresRead MoreEnron Accounting Scandal1096 Words   |  5 PagesEnron was originally a pipeline company in Houston, Texas in 1985. Enron became a company that was able to profit by providing deliveries of gas to utility companies and businesses. As the deregulation of electric power rose, Enron diversified the business and entered into an energy broker, which traded electricity and ot her types of commodities. Enron employed several highly qualified PHDs in mathematics, physics, and economics. Enron continued to enter into contracts with customers and utilizedRead MoreArthur Andersen And Enron Case Essay983 Words   |  4 Pages 1.What was the case about? (Summary of the Case) The case is about Arthur Andersen s role in accounting fraud at Enron which was one of its major clients. The criminal charges faced by the firm in the Enron case and how the Enron case eventually led to the closure of Arthur Andersen company. The company was convicted in 2002 of one count of obstruction of justice because of its role in Enron’s auditing. After the conviction, the firm could no longer provide public accounting services. On JuneRead MoreEnron Company : The United States History1707 Words   |  7 PagesEnron company was created in 1985 out of Texas. The company was in the business of natural-gas pipelines. Eventually they merged with InterNorth and their business shifted towards other natural gas productions. They began to trade natural gas and electricity, which resulted in their biggest growth driver for their company. Enron was not only top in the country, but in the world they were known for their business’s success. In the year of 2000 they hit number seven on the fortune 500 list. AtRead MoreEnron And The Collapse Of Enron1254 Words   |  6 Pagesto shareholders of Enron. The total debt amounted to over $ 16 billion, which was the largest corporate bankruptcy in American history. Shareholders lost 60 billion dollars within a few days, 4500 employees lost their jobs, and the employees lost billions in pension benefits. I had never heard the name of Enron nor Enron’s scand al until I watched a film, â€Å"Enron: The Smartest Guys in The Room,† but I realized the Enron scandal affected the whole of the business in the United States. What were the causes

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.