Enron Case Study
Case Study One: Enron Corporation Richa Chopra
Kaplan University
Case Study One: Enron Corporation
The Enron debacle created what one public official reported was a "crisis of confidence" on the part of the public in the accounting profession. Lists the parties who you believe are most responsible for the crisis. Briefly justify each of your choices. Enron proves to be a classic example of all that glitters is not gold. In 2001, Enron was hailed as America’s most innovative company and its CEO at the time, Jeffrey Skilling was singled out as the No. 1 CEO in the entire country, and its CFO, Andrew Fastow was awarded the Excellence Award by CFO Magazine for his pioneering work on unique financing techniques. But soon after, the Company collapsed, jobs lost, stakeholders panicked, and caused what is now described as the biggest crisis since 1929.
There are many parties that can be held responsible for the crisis:
1. Chairman of the Board and the Board of Directors
The Board of Directors were concerned with making Enron the nation’s greatest company and refused to see the truth and facts behind their accounting and financial reporting decisions. When Sherron Watkins, the former VP of Corporate Development offered to show the problems in accounting decisions, Ken Lay, the Chair of the Board refused and said “He rather not see it”.
2. Regulatory Agencies, SEC and FASB
Enron was able to hide their losses behind their SPEs or Special Purpose Entities by omitting an SPE’s assets and liabilities from its consolidated financial statements and both SEC and FASB failed to provide formal guidelines for companies to follow in SPEs accounting and reporting. As a result of the minimal legal and accounting guidelines for SPEs, Enron along with other companies was able to divert huge amounts of their liabilities and losses to off-balance sheet entities.
3. Management and Accounting team of Enron
Both management and accounting team of Enron manipulated the revenue
Kaplan University
Case Study One: Enron Corporation
The Enron debacle created what one public official reported was a "crisis of confidence" on the part of the public in the accounting profession. Lists the parties who you believe are most responsible for the crisis. Briefly justify each of your choices. Enron proves to be a classic example of all that glitters is not gold. In 2001, Enron was hailed as America’s most innovative company and its CEO at the time, Jeffrey Skilling was singled out as the No. 1 CEO in the entire country, and its CFO, Andrew Fastow was awarded the Excellence Award by CFO Magazine for his pioneering work on unique financing techniques. But soon after, the Company collapsed, jobs lost, stakeholders panicked, and caused what is now described as the biggest crisis since 1929.
There are many parties that can be held responsible for the crisis:
1. Chairman of the Board and the Board of Directors
The Board of Directors were concerned with making Enron the nation’s greatest company and refused to see the truth and facts behind their accounting and financial reporting decisions. When Sherron Watkins, the former VP of Corporate Development offered to show the problems in accounting decisions, Ken Lay, the Chair of the Board refused and said “He rather not see it”.
2. Regulatory Agencies, SEC and FASB
Enron was able to hide their losses behind their SPEs or Special Purpose Entities by omitting an SPE’s assets and liabilities from its consolidated financial statements and both SEC and FASB failed to provide formal guidelines for companies to follow in SPEs accounting and reporting. As a result of the minimal legal and accounting guidelines for SPEs, Enron along with other companies was able to divert huge amounts of their liabilities and losses to off-balance sheet entities.
3. Management and Accounting team of Enron
Both management and accounting team of Enron manipulated the revenue