...want to know what happened to Enron. Although this company's name was splashed over every news network and periodical paper in the United States, few people know the long and torrid story that lead to the collapse of an energy giant. Enron began in the eighties as an energy company selling natural gas. When energy markets were deregulated in the mid-nineties, Enron, like many energy companies, began to focus on selling energy from other sources rather than creating it. The corporation expanded exponentially, and its stock prices soared. Because the company was so wildly successful, they began to branch out into a variety of hot markets, such as the internet. By the beginning of the millennium, Enron was a well-diversified and seemingly indestructible conglomerate with no sign of trouble in sight. However, cracks were forming in Enron's foundation. To sustain their rapid rate of growth, the company had to borrow money. Having excess debts would make the stock look less valuable to potential investors, so the company kept its debts buried in 'partner' corporations that it began solely as a means to hide the truth about their company. Enron was looking better and better because of their illegal and unethical bookkeeping practices. They also began another illegal practice: offering secret information to large potential investors. Legally, companies must give their smaller investors the same inside information as their larger shareholders. Although Enron was beginning to show signs...
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...Journal of Business and Management Vol. 5, No. 10; October 2010 The Case Analysis of the Scandal of Enron Yuhao Li Huntsman School of Business, Utah State University, Logan city, U.S.A E-mail: wyl_2001_ren@126.com, carolee1989@gmail.com Abstract The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron undoubtedly is the biggest audit failure. It is ever the most famous company in the world, but it also is one of companies which fell down too fast. In this paper, it analysis the reason for this event in detail including the management, conflict of interest and accounting fraud. Meanwhile, it makes analysis the moral responsibility From Individuals’ Angle and Corporation’s Angle. Keywords: Enron scandal, Accounting fraud, Moral responsibility, Analysis 1. Review of Enron’s Rise and Fall Throughout the late 1990s, Enron was almost universally considered one of the country's most innovative companies -- a new-economy maverick that forsook musty, old industries with their cumbersome hard assets in favor of the freewheeling world of e-commerce. The company continued to build power plants and operate gas lines, but it became better known for its unique trading businesses...
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...Enron Company Ethical Issues Case Analysis Format I. Time Context After the scandal revealed on Enron Corporation on October 2001 up until in present time (2014) it is still discussed. II. Point of View Enron was founded in 1985, and as one of the world's leading electricity, natural gas, communications and pulp and paper companies before it bankrupted in late 2001. The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. Although Enron went bankrupt and disappeared ten years ago, the impacts it has made on the ethical standards never faded. It took Enron 16 years to go from about ten billion dollar assets to more than sixty-five billion dollar assets, and took twenty-four days to go bankrupt. (McLean & Elkind, 2004) III. Statement of the Problem The said company projected itself as a highly profitable, growing company – an image which quickly turned out to be an elaborate mistrurth. Enron’s statements about profits were shown to be untrue, with a very big debts concealed so that they didn’t show up un the company’s accounts. Moreover, the company was seen to have been extraordinary active in political lobbying – with large numbers of legislators close to the company in one way or another. This fact had not been enough to save it, but raised...
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...Why was Enron such an Admired Company Prior to 2000? Enron was first founded on the year 1985. It is an acquisition between the Internorth and Houstan Natural Gas (HNG) that formed HNG/InterNorth and it was renamed to be Enron. However during the whole process of acquisition, the company incurred a large amount of cash outflow. Not only that, acquisition take place in the midst of deregulation and it cause the company to lost their exclusive right on pipelines. Deregulation means the natural gas at the spot prices will be lower than the bundled price offered by the pipelines. All these had made the company management have to come up with new strategy that could increase the profits and income of the company. Enron came up with the new strategy of investment which is the energy derivatives. Energy derivative is the long term fixed price contract with the customers with the objective to stabilize the natural gas market price. Meanwhile, in the same time, Enron manage the risk that need to be faced by them using financial derivatives. This technique could help Enron in reducing the risk of fluctuation exposure in spot price of the gas. Later on, in the November 1999, Enron developed a Web –based transaction system which called EnronOnline. This system is created by a young consultant, Jeffrey Skilling and he managed the Finance Corp of Enron. Under this system, users can carry out the trading process which is the buying, selling, trading of commodity products online globally...
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...ACC 260 Week 2 The Enron and WorldCom Scandals Material A+Grade Get Tutorial by Clicking on the link below or Copy Paste Link in Your Browser https://hwguiders.com/downloads/acc-260-week-2-the-enron-and-worldcom-scandals/ For More Courses and Exams use this form ( http://hwguiders.com/contact-us/ ) Feel Free to Search your Class through Our Product Categories or From Our Search Bar (http://hwguiders.com/ ) Assignment: The Enron and WorldCom Scandals • Resource: Business & Professional Ethics • Due Date: Day 7 [Individual forum] • Review the accounts of the Enron and WorldCom scandals in Ch. 2 of the text: o Enron’s Questionable Transactions on pp. 96-107 o WorldCom: The Final Catalyst on pp. 114-118 • Answer the following questions using complete sentences: o Enron: 1, 3, 5, 6, and 9 on pp. 106-107 o WorldCom: 1, 3, 4, and 5 on p. 118 • Post your answers as an attachment. Clearly label the case and question number for each of your responses. Enron questions 1, 3, 5, 6, and 9 1. Which segment of its operations got Enron into difficulties? The first thing that got them into trouble was the fact that Kopper was appointed to Fastow and he was an employee of Enron. I do not believe that he had the best interest involved. Another thing was that over 11 million was suppose to be invested and it never was. I believe that this was the start of the problems! Another thing was the fact that Enron was incorrectly booking revenue for services that was...
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...Enron Corporation: THE RISE AND FALL; ACCOUNTING SCANDAL Submitted To: Professor Bill Bristol Submitted By: Kenneth Rhodes, Jr. Metropolitan College of New York (MCNY) TABLE OF CONTENTS I. ABSTRACT...............................................................................................................................2 II. purpose and service....................................................................................................3 III. HistorY............................................................................................................................3-5 IV. The Downfall..............................................................................................................5-6 V. Accounting Scandal................................................................................................6-7 VI. Accounting Practices...........................................................................................7-8 VII. Files’ for Bankruptcy.............................................................................................9 VIII. Auditing.....................................................................................................................9-10 IX. Conclusion: THE AFTERMATH..........................................................................10-11 XI. BIBLIOGRAPHY................................................................................................................12 I. ABSTRACT ...
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...Parth Vyas Econ- 312 Enron bankruptcy Enron Corporation was an American energy company based in Houston, Texas, United States. His company was formed in 1986 through the merger of two natural gas pipeline firms, Houston Natural Gas. Enron started out as a natural gas company put together by Kenneth Lay. Enron's natural gas pipeline brought the company much success. Supplying natural gas was a lucrative business. Enron senior management falsified accounting records to make it look like they made a lot more money than they actually made. Stock prices don't continue to rise unless Net Income is increasing every quarter and every year. Enron did a fraud in stocks. Enron established to shield itself from mark-to-market losses in its growing equity investment business. Enron and all publically traded companies are required to report on their finances to the public and to the Securities and Exchange Commission who regulates financial reporting over publically traded companies. The problem for Enron was that after some successes the traders began to have some financial failures and Enron was no longer really making a profit. The market traders, who were effectively just high-stakes gamblers, were no source of profits but instead a major source of loss themselves. People formerly involved with the company, such as creditors, auditors, the SEC and accounting regulators, it’s a nightmare for them. Enron essentially failed because the executives did not want to admit defeat. They had...
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...Nicholas Barton 00343164 Accounting 2600 Case Study: The Enron Collapse “Why was it that Enron, a financial services company, in effect, could not release a balance sheet with their earnings statement?” -Jim Chanos, President Kynikos Associates. In the film “Enron: The Smartest Guys in The Room,” analyst Jim Chanos asks why, the 7th largest company in the world at the time, could not supply investors with basic financial statements. These statements as we learn in accounting are the fundamental tools through which we communicate a corporation’s financial position. So why was it that a corporation valued as much as $70 Billion at one time would have ever achieved such success without performing basic accounting functions? The CEO, Jeff Skilling’s caustic reply to the question foreshadowed the collapse of a company that had been built on lies and deceit. While the Enron scandal is one of the best known in the history of international business, the reasons for the collapse were built into the company from its very roots. I will begin with an overview of the company and the ensuing scandal, as well as touching on many of the events that led up to the collapse of the company. I will also touch on events that contributed to the company’s inflated stock prices and their unethical and often desperate business practices that undermined the foundation of their business. The aforementioned film, Enron: The Smartest Guys in The Room was an excellent resource as it was primarily historical...
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...ETHICAL FAILURE: Enron Corporation Submitted by: Ishani Rawat 61 Niharika Agarwal 68 Poonam Singh 72 Ruchika Singh 77 Background Once the seventh largest company in America, Enron was formed in 1985 when InterNorth acquired Houston Natural Gas. The company branched into many non-energy-related fields over the next several years, including such areas as Internet bandwidth, risk management, and weather derivatives (a type of weather insurance for seasonal businesses). Although their core business remained in the transmission and distribution of power, their phenomenal growth was occurring through their other interests. Fortune Magazine selected Enron as "America's most innovative company" for six straight years from 1996 to 2001. Then came the investigations into their complex network of off-shore partnerships and accounting practices. What Happened? On April 17, 2001, Enron announced a 281% in revenues and a 20% increase in net income. Its stock was trading near $60. Things began to fall apart in October, however, when Enron reported an adjustment in earnings of over $1 billion in its SEC filings, resulting in a $618 million loss for the third quarter...
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...Professor Young March 5, 2011 Enron was an old line energy company, owning electric power production facilities and natural gas pipelines. It engaged in several acquisitions during the late 1980s and the 1990s that dramatically increased its size. Its acquisitions included power companies in the U.S. and abroad, as well as investments in various energy and technology companies. In the 1990s, Enron reorganized itself as an energy trading company, whose primary form of business was to trade in various energy vehicles, including contracts to provide electric power in the future at pre-determined prices and similar contracts to deliver natural gas, water rights, wind power systems, broad band transmission systems, insurance, and other products. 1. Describe how Enron could have been structured differently to avoid such action. Enron, like most public companies was required by law to describe its party transaction to shareholders and the members of the investing public in several different disclosure documents. Overall, Enron failed to disclose facts that were important for understanding the substance of the transaction. Although they did disclose that there were large transactions that the CFA had interest. Enron did not give the CFO’s actual or expected benefits from these transactions or provide complete financial statements. The organizational structure could have been different by not changing the original structure. When Enron decided to change its structure by...
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... and the concern for consequences of business activity. Enron, a energy trader, was formed in July 1985 when Texas-based Houston Natural Gas merged with InterNorth. At first Enron was only a natural gas provider, but in 1989 Enron begun trading natural gas commodities, and in 1994 it began trading electricity. Enron was considered one of the most innovative companies of the late 20th century, after their scandal Enron became a symbol for corruption and mismanagement in businesses. The scandal started in the late 90s when Enron pushed their debt obligations to offshore partnerships, at the same time the company was reporting inaccurate trading revenues. Enron used its partnerships to sell contracts back and forth to itself and booking revenue each time. In 2001 Chairman, Kenneth Lay received an anonymous memo expressing wariness about the Fastow partnerships and warned of possible accounting scandals. On October 16th Enron announced a $638 million loss for the third quarter and took $1.2 billion reduction in shareholder equity. Enron’s accountants began shredding documents related to Enron audits. Eventually Enron was investigated on Nov. 8th; Enron revised its financial statements, which posted $586 million in losses. Enron became bankrupt on December 2nd. Enron is an example of what happens when a business is not in compliance with the rules. Enron tried moving...
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...THE COLLAPSE OF ENRON & THE INTRODUCTION OF THE SARBANES OXLEY ACT BY TREVOR GARRETT 02/25/2011 Abstract Enron Corporation was one of the largest energy trading, natural gas and Utilities Company in the world that was based in Huston, Texas. The downfall of Enron is one of the most infamous and shocking events in the financial world, and its reverberations were felt around the globe. Prior to its collapse in 2001, Enron was one of the leading companies in the U.S and considered among top 10 admired corporations and most desired places to work at. Its revenues made up US $139 to $184 billion, assets equaled $62 to $82 billion, and the number of employees reached more than 30,000 people in 20 countries around the world. While on the surface it seemed like the perfect Corporation, internally it had highly decentralized financial control and decision-making structure, which made it practically impossible to get coherent and clear view on corporations' activities and operations. Enron manipulated its books and assets to help it report steady profit growth to Stock Exchanges and Credit-rating agencies. Investors generally are not willing to pay as much for the stock of a volatile trading operation, and this gave rise to manipulations. This paper briefly describes the legal and ethical breaches by Enron, the key factors and events that led to its collapse and the passing of the Sarbanes Oxley Act as a consequence of such a catastrophe. The paper also discusses the key components...
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...Enron Corporation (former NYSE ticker symbol ENE) was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 20,000 staff and was one of the world's major electricity, natural gas, communications, and pulp and paper companies, with claimed revenues of nearly $101 billion during 2000.[1] Fortune named Enron "America's Most Innovative Company" for six consecutive years. At the end of 2001, it was revealed that its reported financial condition was sustained substantially by an institutionalized, systematic, and creatively planned accounting fraud, known since as the Enron scandal. Enron has since become a well-known example of willful corporate fraud and corruption. The scandal also brought into question the accounting practices and activities of many corporations in the United States and was a factor in the creation of the Sarbanes–Oxley Act of 2002. The scandal also affected the greater business world by causing the dissolution of the Arthur Andersen accounting company.[2] Enron filed for bankruptcy protection in the Southern District of New York during late 2001 and selected Weil, Gotshal & Manges as its bankruptcy counsel. It ended its bankruptcy during November 2004, pursuant to a court-approved plan of reorganization, after one of the most complex bankruptcy cases in U.S. history. A new board of directors changed the name of Enron to Enron Creditors Recovery Corp., and emphasized...
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...Enron Corporation (former NYSE ticker symbol ENE) was an American energy company that was originally involved in transmitting and distributing electricity and natural gas throughout the United States. It was founded in 1985 in Omaha, NB. The company later relocated to downtown Houston, TX and was based in the Enron Complex. Enron transformed energy into a commodity that could be traded like stock and bonds. Before its bankruptcy in late 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $101 billion in 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years. The top executives at Enron were: Kenneth Lay: Founder, Chairman, and Chief Executive Officer Jeffrey Skilling: President, Chief Operating Officer, and CEO (February-August 2001) Andrew Fastow: Chief Financial Officer Prior to joining Enron, Skilling told Lay that he would not join the company and build his new division unless he could use mark-to market accounting. The concept of mark-to market accounting is essentially stating potential future values as profits. Much of what happened at Enron can be linked to this form of accounting. This radical notion of value came to define the way Enron presented itself to the world, justifying the millions in profits on a business before it had generated a penny in actual revenues. Skilling felt that...
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...Head: ENRON CORPORATION Enron Corporation July 20, 2011 Based in Houston, Texas, Enron Corporation was an American energy, commodities and service company. Enron was formed in 1985 by Kenneth Lay after merging Houston Natural Gas and InterNorth. Enron employed approximately 22,000 employees and was one of the world’s leading electricity, natural gas communications, and pulp and paper companies before its demise in late 2001. For six consecutive years, Fortune named Enron "America's Most Innovative Company". At the end of 2001, it was discovered that Enron’s financial accounting reports had been falsified and the company had filed for bankruptcy. This substantial act was known as the "Enron scandal". The Enron scandal also lead to the creation of the Sarbanes-Oxley Act of 2002, a United States federal law enacted on July 30, 2002 to enforce firmer standards for management and accounting firms. Enron has since become a popular symbol of willful corporate fraud and corruption. Describe how Enron could have been structured differently to avoid such activities. Enron withheld essential financial and accounting information from the public and its shareholders. By law Enron was required to disclose their company financial dealings. Enron’s shareholders should have been informed about their financial and accounting transaction. Several shareholders were employees who had invested their life savings into this company. Instead of promoting within the company, Enron...
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