Eron Case Eassy
Enron Corporation, once the seventh largest publicly traded corporation in the United States, declared its bankruptcy on December 2, 2001 (Senate, U. S., 2002). Its failure represented the biggest business bankruptcy in the U.S. ever while also spotlighting the moral failings of corporate America’s. Enron has shaken the business world and become a symbol of modern corporate crime.
It led to the ultimate dissolution of Arthur Anderson, one of the top Audit and accounting firms and drove the formation of Sarbanes-Oxley act. Not mention left 22000 people unemployed and the great loss of its shareholders.
Chief Executive Officer Kenneth Lay, Chief Executive Officer Jeffrey Skilling and the Chief Financial Officer Andrew Fastow are the key decision makers. All the shareholders, investors, audit firms, legal counsel, employees, regulators, equity markets and debt market are the stakeholders.
In Eron’s case, the U.S. Securities and Exchange Commission approved Enron to use the mark-to-market method on 1992 (Gibney, 2005), in contrast with straightforward kind of accounting this method requires estimations of future incomes based on the future net value when a long-term contract is signed, even the money was not received, this could given misleading information to the investors. Enron used Special purpose entities to hide debts and overestimated its equity, as well as to get away from the traditional accounting convention. With the help of deregulation of over-the-counter derivatives, Enron manipulated the California energy market, to increase its stock price and revenue. What’s more, Enron created over 3000 partnerships because this may help Enron to hid bad debts. Enron was not required to report the partnership’s financial condition combined with its own financial statement, as long as Enron get another partner to take 3% or more stake of it. Arthur Andersen audited the financial statements of Enron for every year since it established in 1985. Actually, there was
It led to the ultimate dissolution of Arthur Anderson, one of the top Audit and accounting firms and drove the formation of Sarbanes-Oxley act. Not mention left 22000 people unemployed and the great loss of its shareholders.
Chief Executive Officer Kenneth Lay, Chief Executive Officer Jeffrey Skilling and the Chief Financial Officer Andrew Fastow are the key decision makers. All the shareholders, investors, audit firms, legal counsel, employees, regulators, equity markets and debt market are the stakeholders.
In Eron’s case, the U.S. Securities and Exchange Commission approved Enron to use the mark-to-market method on 1992 (Gibney, 2005), in contrast with straightforward kind of accounting this method requires estimations of future incomes based on the future net value when a long-term contract is signed, even the money was not received, this could given misleading information to the investors. Enron used Special purpose entities to hide debts and overestimated its equity, as well as to get away from the traditional accounting convention. With the help of deregulation of over-the-counter derivatives, Enron manipulated the California energy market, to increase its stock price and revenue. What’s more, Enron created over 3000 partnerships because this may help Enron to hid bad debts. Enron was not required to report the partnership’s financial condition combined with its own financial statement, as long as Enron get another partner to take 3% or more stake of it. Arthur Andersen audited the financial statements of Enron for every year since it established in 1985. Actually, there was