off-the-books activity‚ excessive compensation these are some of the headings of the report prepared by the U.S. Senate’s Permanent Subcommittee on Investigations titled "The Role of the Board of Directors in Enron’s Collapse." (Permanent Subcommittee on Investigations‚ 2002) In February‚ 2002‚ Enron’s former Chief Executive Officer Jeffery Skilling had testified before members of the Senate Commerce‚ Science and Transportation Committee that Enron was a financially sound company the day he resigned in
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Case Background At one time Enron was one of the world’s largest producers of natural gas‚ oil‚ and electricity. It also appeared to be one of the most profitable companies‚ taking shareholders from $19.10 in 1999 to $90.80 by the end of 2000. Enron’s top management answered to a Board of Directors whose responsibility was to question and challenge new partnerships‚ ventures‚ and decisions within the company. On several occasions‚ Andrew Fastow‚ the company’s Chief Financial Officer approached
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the investment banking industry starting in 1999. FALSE 3. For the most part‚ the credit ratings granted to mortgage-backed securities did not accurately reflect the true risk of the securities. TRUE 4. In hindsight‚ most observers agree that Enron’s problems were caused by a failure of the board of directors to exercise adequate oversight. TRUE ?? 5. Although The Board of Directors is responsible for approving the hiring of auditors‚ they are not responsible for the financial statements. It
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to Infinite Energy‚ the first and main cause of Enron’s collapse was failed investments. Enron invested money in fiber-optic networks‚ a power plant in India and water distribution in the United Kingdom‚ to name a few. While a company the size of Enron could afford occasional losses‚ the mounting‚ failed investments added up and created a plethora of debt. * Hidden Losses Infinite Energy states that the second and most shady reason for Enron’s collapse was the hidden losses within the company
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recoup their losses. Some blamed Arthur Andersen‚ Enron’s accounting firm‚ for certifying financial statements that arguably had wrongfully concealed the company’s precarious financial situation; some blamed the board of directors for insufficient overnight. In December 2001‚ Enron’s applied bankruptcy filing documents. With this time‚ the related bankruptcy investigation‚ arrest and confiscation of the occurrence were happened all the time. Enron’s shareholders‚ including the nation’s mutual fund
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hypocrisy‚ dishonorable actions and unethical behavior of Kenney Lay‚ Jeffrey Skilling‚ Andrew Fastow led to bankruptcy. This and many other problems‚ such as loss in transactions involving the swaps stocks‚ SPE related issues and est.‚ finally contributed to crisis. As Enron executives‚ all of their concerns should have been focused on Enron’s profits‚ but seems that many of them only cared about their wealth. When financial problem surfaced‚ they did not attempt to fix it‚ but made efforts to maintain
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DEBIT CREDIT AND ENRON Accounting has become very essential part of any business in today’s world. It helps the business keep running and makes sure that things are going towards in right direction. It controls expenses‚ improves plans‚ accountability and reporting under given regulatory framework. Accounting plays vital role in profitability of any concern. Profit is the life blood of any business‚ so how profit is reported on books is always key concern. Over a period of years there has been
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serves as a kind of morality tale of corporations‚ regulators‚ and investors. As we have discussed in class‚ the tragic effects of Enron’s overreaching arrogance provide a textbook example of both the best and the worst of American business culture and practice. Although the catastrophe’s complete impact may never be completely determined‚ it seems likely that Enron’s collapse caused more than one major company to cease to exist‚ several industries experienced radically changed environments‚ regulators
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Part B: What role did the CFO play in creating the problems that led to Enron’s financial problems? In order to prevent the losses from appearing on its financial statements‚ Enron used questionable accounting practices. To misrepresent its true financial condition‚ Andrew Fastow‚ the Enron’s CFO‚ takes his role involving unconsolidated partnerships and “special purpose entities”‚ which would later become known as the LJM partnership. Taking advantage from the SPEs’s main purpose‚ which provided
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leader of electricity and natural gas industries‚ filed for bankruptcy protection in late 2001. It was revealed that the company had been hiding investment losses and created fictitious revenue through several complicated accounting gimmicks. Besides Enron’s senior management who created the whole fiasco‚ many people believed that several other parties‚ such as the Board of Directors and the external auditors should also share the blame. The public began to question the integrity of US corporations‚ especially
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