Enron Scandal Summary
Enron was an energy company based in Huston, Texas. It was one of the innovative and also one of the seven largest company in the United States in 1990s. It had about 20,000 employees at that time. The company was making profit from supplying natural gas and electricity until the late 1980s, but after that it expanded its operation to the trading of energy related financial products such as derivatives. Enron looked like a great company that makes a lot of profit however, in 2001, after the firm’s accounting fraud went public, the company filed for bankruptcy.
After Enron Scandal, in 2002, the Sarbanes-Oxley Act was passed to prevent potential financial fraud. This act regulate the accounting standard and especially its transparency, as follows.
• All companies must have a majority of independent directors.
• Independent directors must comply with an elaborate definition of independent directors.
• The compensation committee, nominating committee, and audit committee shall consist of independent directors.
• All audit committee members should be financially literate. In addition, at least one member of the audit committee is required to have accounting or related financial management expertise.
• In addition to its regular sessions, the board should hold additional sessions without management.
Overall, the Enron Scandal caused US to setup a reinforcement of accounting audit system, and even Europe and Asia were influenced.
Enron was an energy company based in Huston, Texas. It was one of the innovative and also one of the seven largest company in the United States in 1990s. It had about 20,000 employees at that time. The company was making profit from supplying natural gas and electricity until the late 1980s, but after that it expanded its operation to the trading of energy related financial products such as derivatives. Enron looked like a great company that makes a lot of profit however, in 2001, after the firm’s accounting fraud went public, the
After Enron Scandal, in 2002, the Sarbanes-Oxley Act was passed to prevent potential financial fraud. This act regulate the accounting standard and especially its transparency, as follows.
• All companies must have a majority of independent directors.
• Independent directors must comply with an elaborate definition of independent directors.
• The compensation committee, nominating committee, and audit committee shall consist of independent directors.
• All audit committee members should be financially literate. In addition, at least one member of the audit committee is required to have accounting or related financial management expertise.
• In addition to its regular sessions, the board should hold additional sessions without management.
Overall, the Enron Scandal caused US to setup a reinforcement of accounting audit system, and even Europe and Asia were influenced.
Enron was an energy company based in Huston, Texas. It was one of the innovative and also one of the seven largest company in the United States in 1990s. It had about 20,000 employees at that time. The company was making profit from supplying natural gas and electricity until the late 1980s, but after that it expanded its operation to the trading of energy related financial products such as derivatives. Enron looked like a great company that makes a lot of profit however, in 2001, after the firm’s accounting fraud went public, the