Enron Scandal
Current issue: Scandals in auditing
Enron Scandal
1. Introduction
Accounting scandals are political or business scandals which arise with the disclosure of financial misdeeds by trusted executives of corporations or governments. These days, not too often, these scandals are splashed as headlines across media. Why? Because there are complex groups of stakeholders who might be seriously affected by the scandals. Enron scam was the most remarkable scandal in 20 centuries by their institutionalized, systematic, and creatively planned accounting fraud. The scandal also brought into question the accounting practices and activities of many corporations in the United States. The scandal also affected the greater business world by causing the dissolution of the Arthur Andersen accounting company. This report will reveal the whole story of Enron scam and auditors role from the situation in more depth. It will also include the current situation of those responsible for the fraud.
2. Background of U.S in 1990s
The 1990s of U.S were a time of prosperity and this prosperity period is originated from growth in IT corporates and in accordance with increase in productivity as technology develops with IT. In the mid- to late-90s, society’s expectations of what the Internet could offer were unrealistic. Many investors foolishly ignored the fundamental rules of investing in the stock market and instead, investors and entrepreneurs became preoccupied with new ideas that were not yet proven to have market potential. Furthermore, they ignored the blatant signs that the bubble was about to burst. (IT Bubble in 90s)
There are two main reasons for the bubble; with investors` optimistic expectation, there were a lot of ‘Window dressing’ in accounting. As Enron collapsed, the growth of the tech sector proved to be illusory, and bubble started to sober.
3. Enron- who are they?
Enron Corporation is an energy trading, communications company which was formed in 1985 based in
Enron Scandal
1. Introduction
Accounting scandals are political or business scandals which arise with the disclosure of financial misdeeds by trusted executives of corporations or governments. These days, not too often, these scandals are splashed as headlines across media. Why? Because there are complex groups of stakeholders who might be seriously affected by the scandals. Enron scam was the most remarkable scandal in 20 centuries by their institutionalized, systematic, and creatively planned accounting fraud. The scandal also brought into question the accounting practices and activities of many corporations in the United States. The scandal also affected the greater business world by causing the dissolution of the Arthur Andersen accounting company. This report will reveal the whole story of Enron scam and auditors role from the situation in more depth. It will also include the current situation of those responsible for the fraud.
2. Background of U.S in 1990s
The 1990s of U.S were a time of prosperity and this prosperity period is originated from growth in IT corporates and in accordance with increase in productivity as technology develops with IT. In the mid- to late-90s, society’s expectations of what the Internet could offer were unrealistic. Many investors foolishly ignored the fundamental rules of investing in the stock market and instead, investors and entrepreneurs became preoccupied with new ideas that were not yet proven to have market potential. Furthermore, they ignored the blatant signs that the bubble was about to burst. (IT Bubble in 90s)
There are two main reasons for the bubble; with investors` optimistic expectation, there were a lot of ‘Window dressing’ in accounting. As Enron collapsed, the growth of the tech sector proved to be illusory, and bubble started to sober.
3. Enron- who are they?
Enron Corporation is an energy trading, communications company which was formed in 1985 based in
References: John C. Coffee, Jr. JANUARY 21, 2014 http://www.uic.edu/classes/actg/actg516rtr/Notes/13-Enron-Notes.pdf/ 516financial statement analysis