Guan Wang 166000920 Term Paper Outline I.Case description-Enron Before bankruptcy Enron was one of the world 's major electricity, natural gas and pulp and paper company. It started with the pipelines and as the company grows up, it start to expand into many different business areas. The company used to have approximately 20,000 employees. Enron’s greed Enron advertise itself as a profitable, prosperous company. However, using “mark-to-market accounting”,Enron records non-existent profits and makes a bad record.
However, the UK Government insists its links with Enron have neither changed policy nor bought access to ministers. A second front of allegations emerged over Labor’s close ties with Andersen, Enron’s accountants, a company barred from government work for failing to prevent the DeLorean car company collapse. This ban was later lifted, which has caused the rise of awkward questions
Enron was a Houston-based natural gas pipeline company formed by merger in 1985. By early 2001, Enron had morphed into the 7th largest U.S. Company and the largest U.S. buyer and seller of natural gas and electricity. According to New York Times (2002), Enron announced a huge third-quarter overstating in its earnings by almost $600 million over five years. The Security Exchange Commission (SEC) then began an inquiry into Enron’s accounting practices on October 22, 2001. Enron filed for bankruptcy on December 2, 2001 and left all the investors and retirees with worthless stock.
Enron filed for bankruptcy and it was found that Arthur Anderson was also guilty of falsifying Enron’s accounts. Sherron Watkins had acted as an internal whistleblower. And the suspicions increased as Enron’s stock price increased. 3 # Scandal of WorldCom: It occurred in the year 2002. WorldCom was a telecommunication company.
Arthur Levitt, former chairman of SEC, stated “I think the Enron scandal is symptomatic of something much broader than Enron. I think it's symptomatic of a breakdown of the ethical values of business over a period of perhaps 20 years, a gradual erosion of business ethics that brought us to an Enron, but might very well bring us to a whole host of Enrons as we move down the road.” This does seem to be a much larger problem then the collapse itself. Their unethical ways cost Americans millions of dollars, and some their life savings. At first it seemed as though the Kenneth Lay let his pride get in the way of admitting his company was going down but the further you get into the details it was all about the money. With their way of doing Market to market account it made them look as though they were making money when in fact they were
The downfall of these entities highlighted ethical issues that could have been solved though proficient corporate governance and internal controls. Analysis of these cases also provides lessons to accountants on due diligence and suggestions on avoiding accounting scandals. The Enron accounting scandal revealed in October 2001, led to the bankruptcy of the Enron Corporation; an American energy and commodities trading company. At its peak, the company operated on annual revenues in excess of $100 billion and was the source of employment for more than 20,000 people. Enron’s collapse was primarily rooted in poor management and its negligence in sound accounting practises.
Solution:- Capitalism being a vital requirement in our life doesn’t let businesses in defrauding its creditors, spewing pollution, selling the products of the consumers or cheating on taxes of the individuals. The Enron case, in consultation with NASA helped in imposing substantial costs and revenues of the business by resenting the rules and regulations made there under. The two executives of the film helped in running market scams and deregulating larger subsidies for Enron, the skimming of cash into the accounts and the investigation
Thus, in 2002 Enron announced its bankruptcy what turned out to be one of the biggest issues in American history. The company’s clients, investors and shareholders lost millions of dollars due to the drop in stock. In addition, many people lost their jobs or even the entire pensions. When and how did the issue start? In fact, there were a number
The scandal of Enron shown in October, 2001 eventually resulted in bankruptcy of Enron Corporation, the American energy company based in Houston, Texas and the actual dissolution of Arthur Andersen which was one of five biggest audits and partnership of accounts department in the world. Being the biggest reorganization of bankruptcy in the American history at that time, Enron was quoted as the biggest control failure. Many registered assets and profit of Enron were inflated or even absolutely dishonest and not existing. One example of roguish reports was during 1999 when Enron promised to extinguish investments of Merrill Lynch & Co. with percent to show profit on its books. Are long and losses were placed in the enterprises created "at distance
Investigators say, the auditor was complicit in perpetrating one of the biggest frauds in corporate history. Hundreds and hundreds of people were put out of work, and thousands of investors including the employees lost billions of dollars as Enron 's shares shrank to penny stock. Shredding documents, allegations of company officials willfully ignored internal warnings about the accounting irregularities, stories of executives seeking help from top administration officials as they pocketed millions of dollars in stock market gains. It became clear that the sudden collapse of the country 's seventh largest company was going to have implications for business, but for politics and policy as well. Enron and their officers were among the biggest donors to U.S. political campaigns over a decade.