Financial Issues In Enron

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Enron is a Houston based energy firm which was credited to create market trading in energy. In just sixteen years, it becomes the world’s largest energy trading company. Offered its services to thousands of customers around the world including Wholesale Services, Energy Services and Global Services combing broadband and transportation services. It experienced a meteoric rise and has 22th rank in the fortune’s 100 best companies list in America in 2000. With the energy crisis in California, Enron dilemma was started due to poor handling of deregulation of energy by the company itself. It appears that the success of Enronwas just luck and it seems to have sunk into a financial predicament. The collapse of Enron after 2000, has called into question…show more content…
Conflicting Interest: It has been suggested that conflicts of interest and a lack of independent oversight of management by Enron's board contributed to the firm's collapse. Moreover, some have suggested that Enron's compensation policies engendered a myopic focus on earnings growth and stock price. In addition, recent regulatory changes have focused on enhancing the accounting for SPEs and strengthening internal accounting and control systems. We review these issues, beginning with Enron's board. The conflict of interest between the two roles played by Arthur Andersen, as auditor but also as consultant to Enron. While investigations continue, Enron has sought to salvage its business by spinning off various assets. It has filed for Chapter 11 bankruptcy, allowing it to reorganise while protected from creditors. Former chief executive and chairman Kenneth Lay has resigned, and restructuring expert Stephen Cooper has been brought in as interim chief executive. Enron's core business, the energy trading arm, has been tied up in a complex deal with UBS Warburg. The bank has not paid for the trading unit, but will share some of the profits with Enron. Enron and the reputation of Arthur…show more content…
The magnitude of the alleged accounting errors, combined with Andersen's role as Enron's auditor and the widespread media attention, provide a seemingly powerful setting to explore the impact of auditor reputation on client market prices around an audit failure. CP investigates the share price reaction of Andersen's clients to various information events that could lead investors to revise their beliefs regarding Andersen's reputation. Perhaps most damaging to Andersen's reputation was their admission on January 10, 2002 that employees of
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