...Enron Corporation: El Gran Fraude Financiero En 1985 nació Enron Corporation de la fusión de Houston Natural Gas Company e InterNorth. Enron Corporation pasó de ser una empresa común de gas en Texas, a participar en gran parte del mercado energético mundial y a ser considerada la séptima empresa de Estados Unidos según la lista de Fortune 500. Incluso las acciones de Enron en ese entonces se valoraban en más de 90 dólares. El fraude de Enron salió a la luz cuando en octubre del 2001 informaron sobre los resultados del primer trimestre de ese año. Algo en el informe no cuadraba y eso fue lo que levantó sospechas y dio inicio a una investigación. Es díficil determinar cómo empezó este gran fraude y son innumerables la cantidad de acciones antiéticas que relizó Enron. Primero que nada, creó compañías ficticias con el fin de generar mayores ingresos, crear y aumentar valor para los accionistas y por supuesto, aumentar la rentabilidad de la empresa. Los ejecutivos de la empresa recibieron opciones sobre acciones, y solicitaron la indemnización de gastos para así evitar pagar impuestos. Por otro lado, las personas que notaban las irregularidades en la contabilidad de la compañía eran despedidas para poder continuar con la farsa “tranquilamente”. La compañía realmente estaba en la quiebra y logró ocultarlo manipulando la información con ayuda de la firma auditora Arthur Andersen, encargada de la contabilidad de Enron, que luego admitió haber destruido documentos y como si fuera...
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...Enron Corporation (Former NYSE ticker symbol ENE) was an American energy company based in Houston, Texas. Before its bankruptcy in late 2001, Enron employed approximately 22,000staff 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. At the end of 2001 it was revealed that its reported financial condition was sustained substantially by institutionalized, systematic, and creatively planned accounting fraud, known as the "Enron scandal". Enron has since become a popular symbol of willful corporate fraud and corruption. The scandal also brought into question the accounting practices of many corporations throughout the United States and was a factor in the creation of the Sarbanes-Oxley Act of 2002. Enron filed for bankruptcy protection in the Southern District of New York in late 2001 and selected Weil, Gotshal & Manges as its bankruptcy counsel. It emerged from bankruptcy in November 2004 after one of the biggest and most complex bankruptcy cases in U.S. history. On September 7, 2006, Enron sold Prisma Energy International Inc., its last remaining business, to Ashmore Energy International Ltd. Following the scandal, lawsuits against Enron's directors were notable because the directors settled the suits by paying very significant sums of money personally. The scandal also caused the dissolution...
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...Enron Corporation Business Law I July 27, 2011 1. Describe how Enron could have been structured differently to avoid such activities. RESPONSE: They could’ve first, avoided the mark-to-market accounting because it led to a “tremendous drive for growth” which made a big “difference between its reported profits and its cash flow” (Bagley & Savage, 2010). They also should not have used their own stock because it “depended on the maintenance of Enron’s high stock price to achieve its purpose” (Bagley & Savage, 2010). They also should’ve never made up the California energy crisis which never happened. 2. Discuss whether Enron’s officer’s acted within the scope of their authority. RESPONSE: Enron’s officers helped them with their scam. They suggest that they ignore the risky accounting practices and to keep doing it. They were hiding billions of dept with their bad financial reports. 3.Describe the corporate culture at Enron. RESPONSE: To me it seemed like everyone in the high positions were altogether in the scam. They became money hungry when they started seeing the millions of dollars rolling in. I think the employees were just working and not aware of what was going on. 4. Discuss two alleged irregularities in the action between sellers of securities and Enron. RESPONSE: The two alleged irregularities in the actions between sellers of securities and Enron was their accounting and their stocks. They hired professional accountants that was in on...
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...The Enron Corporation Scandal Yolanda M. Allen Business Law I/LEG 100 Strayer University Instructor: Prof. Bryan Smith 20 August 2011 The Enron Corporation Scandal Describe how Enron could have been structured differently to avoid such activities. The origins of Enron started with the merger of Kenneth Lay’s company, Houston Natural Gas with InterNorth, a Nebraska-based pipeline company in 1985. Initially, from the beginning, Enron began to show some cracks in its structure, as the company started acquiring huge amounts of debt during its foundation, and as a result of the deregulation of gas pipelines, it no longer had exclusive rights to its own pipelines (Thomas, C.B., 2002). To solve Enron’s credit and revenue problems, Kenneth Lay, CEO hired Jeffrey Skilling, who eventually became the company’s Chief Financial Officer to the CEO in 1996. Almost overnight, Skilling turned Enron into a major market middleman for energy that would dominate the trading market. After many years of seemingly huge successes, more cracks began to appear in the Enron crown. In the final analysis, the conspiracy of Lay, Skilling and others led to the collapse of the company due to fraud, false reporting of revenue, shoddy accounting practices and a general disregard for virtually every tenet of business ethics. Building a robust ethics infrastructure that is self-sustaining, by composing a sound code of conduct that supports the top level, and communicating it to all employees...
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...Enron Corporation Scandal The Enron Corporation scandal, exposed in 2001, led to the downfall of the 7th biggest corporation of the world and carried the fifth largest auditing firm Arthur Andersen with it. The extremely complex fraud case was devised and led by top company executives Jeff Skilling, Andrew Fastow and Kenneth Lay. The executives used financial engineering to find loopholes in the system and cover their tracks, posting inexistent revenues and concealing debt. This paper discloses what happened to Enron Corporation and includes major legal issues top executives face. Enron was founded in 1985, and rose to become one of the world’s leading electricity and natural gas companies. It was pronounced by Fortune magazine as the most innovative company six times in a row. Which raises a question: what caused such a corporate giant like Enron to fall so fast? There are many factors that contributed to Enron’s demise, however the key factor, which enabled this elaborate scheme, was the mark to market accounting method introduced by Jeff skillet. Mark to market is a questionable accounting method, it requires the firm to post its theoretical future profits in the balance sheet once a long-term contract is signed. Executives at Enron used this to their advantage, posting unrealistic profits. One of the company’s biggest projects was the construction of a power plant in India, using mark to market, executives predicted profits in the billions, in addition they...
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...1. The Enron debacle created what one public official reported was a "crisis of confidence" on the part of the public in the accounting profession. List the parties who you believe were most responsible for that crisis. Briefly justify each of your choices. - SEC. Failed enforcement - Andersen firm. Fixed financial statements. - Corporate executives. Fraud financial reporting. - Auditors and lawyers who failed make the right decision. 2. List three types of consulting services that audit firms are not prohibited from providing to clients that are public companies. For each item, indicate the specific threats, if any, that the provision of the given service could pose for an audit firms's independence. • Services related to accounting entries. Bookkeeping and/or financial statements of the client. • Advising on financial information system would make audit firm to question the system used by a client. • Advising on management/human resources hire resources. • Investment broker adviser. • “Expert” Advising not based on audit. 3. For purposes of this question, assume that the excerpts from the Power Report shown in Exhibit 3 provide accurate descriptions of Andersen's involvement in Enron's accounting and financial reporting decisions. Given this assumption, do you believe that Andersen's involvement in those decisions violated any professional standards? If so, list those standards and briefly explain your rationale. Independence. Andersen failed to report accounting/financial...
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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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...RUNNING: Demise of Enron Corporation® and WorldCom® Demise of Enron Corporation® and WorldCom® Your Name October 31st, 2012 FIN/486 Instructor Enron Corporation and WorldCom In the last decade, two powerful American companies, Enron Corporation and WorldCom, have become the models of accounting corporate fraud. The Enron Corporation was founded in 1985 by Kenneth Law in Omaha, Nebraska. The company later moved its operation to Houston Texas when InterNorth and Houston Natural Gas merged. This American organization offered paper, pulp, electric, communication, and natural gas manufacturing. Enron employed over 20,000 professionals and reported earnings worth over 100 billion dollars. A few years earlier, on the other side of the country, WorldCom was established by Bernand Ebbers in Hattiesburg, Massachusetts . WorldCom make great growth strokes through mergers, acquisitions, long distance rates, and cutting edge technology in the communications industry. It achieved an unprecedented success that would soon unveil accounting fraud, scandal, and shameful demise. But in 2002 Enron and WorldCom were exposed as corrupt organizations, run by fraudsters that had lined their pockets with tens of millions of dollars and destroyed $240 billion dollars worth of investor's money (BBC News, 2012). Major Factors that Led to the Dissolution Business ethics are the standards of conduct or moral judgment that apply to persons engaged in commerce. Violations of these...
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...The Rise and Fall of the Enron Corporation Malay Blama Leg 500 Summer Quarter Prof. D. F. Page Strayer University August 9, 2009 Abstract Enron was an American energy trading and communication company based in Houston, Texas. It was formed in 1985 by Kenneth Lay after merging with Houston Natural Gas and InterNorth companies. Kenneth Lay was originally the CEO of the Houston Natural Gas company prior to the merger. By the middle of 2000 Enron stock price hit all time high of $90.00 per share causing share holders to lose nearly $11 billion when it plummeted to less than $1 per share by the end of November 2001. Few years later following its formation when Jeffery Skilling was hired, he developed a staff of executives that through the use of accounting loopholes, special purpose entitles and poor financial reporting, were able to hide billions in debt from failed deals and projects. They were able to mislead Enron’s’ board of directors and audit committee of high-risk accounting issues as well as pressure what was supposed to be and independent Certified Public Accounting Firm, the Author Anderson, to ignore the issues. The corporation went bankrupt as a result of committing institutionalized, systematic and well-planned accounting fraud. Since its fall, Enron has become a symbol of corporate fraud and corruptions. Corporate governance structures have traditionally been a private matter between...
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...ACCT 4450 June 2009 Enron Corporation: Impact on Profession of Chartered Accountancy/Auditing References: • Case “Enron Corporation and Andersen, LLP – Analyzing the Fall of Two Giants” Beasley et al, Auditing Cases – An Interactive Approach,4th Edition • Article “After Enron” John Lorinc, CA Magazine, December 2002 • Film excerpt shown in class “Enron: The Smartest Guys in the Room” Peter Elkind & Bethany McLean; Alliance Atlantis Exercise: Your group will prepare a presentation to the class (max 5 mins) on the results of the discussion of your assigned question. All questions are examinable on the final exam: 1) Who was impacted by the fall of Enron? Who were the users of Enron’s financial statements? There was implied or explicit reliance placed on various parties by the shareholders. Who were some of the parties mentioned, and what complaints were raised about these parties (whether legal or ethical)? 2) What was the “tone at the top” at Enron? How did this contribute to their demise? Does a company’s corporate culture impact an auditor’s assessment of audit risk? Explain. 3) Assess audit risk at Enron. Explain the factors that contributed to your risk assessment. (Also reference the Arthur Anderson e-mail notes from the retention meeting.) 4) Kenneth Lay, Chairman of the Board and prior CEO, testified at hearings that “I can’t be responsible for things I didn’t know about.” Jeffery Skilling, former CEO also testified...
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...Enron Corporation case study • The Enron debacle created what one public official reported was a "crisis of confidence" on the part of the public in the accounting profession. Lists the parties who you believe are most responsible for the crisis. Briefly justify each of your choices. The debacle of Enron, a US firm is looked upon as the worst debacle and fall out in the history of US bankruptcy filed cases. There are many parties involved when it concern to Enron debacle, which was accorded to accounting instability and the compromising factor of accounting profession itself. Out of the many parties in the league and the major force behind the debacle of Enron concern Andersen's, the accounting and auditing firm that once deserved name in the industry for its conscience in accounting professional services and auditing. As the case relates to, accounting audit for Enron is attended by Andersen's since long enough. However, the interesting feature is that some compromise in the profession of accounting services by Andersen's was notable, given that there are noteworthy feature of stock manipulation, especially in financial statements of Enron attended and audited by Andersen's. The statement and restatement of Enron also gives some probable indication for manipulation of accounting, where debate and counter debate in that regard from the prying eye of the media was a common feature. Thus, the involvement of Andersen's in Enron consultancy and professional auditing makes it...
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...Case Study: Enron Corporation and Andersen, LLP----Analyzing the Fall of Two Giants The accounting issues involved in Enron’s case are: 1) Valuation issues with international assets; 2) Aggressive accounting treatments towards SPEs; 3) Negligence of information disclosure, and 4) Dereliction of duty of internal auditing department. The auditing issues involved in Enron’s case are: 1) Putting its reputation at risk, Andersen issued “clean” audit opinions on Enron’s financial statement; 2) Auditing and consulting services were provided by the same accounting firm, which led to conflict of interest and jeopardized integrity, and 3) The revenue of providing auditing service to Enron occupied so large a share of Andersen’s total revenue that it lost its independence when confronted to Enron. Questions: Q2. a. Every company should be headed by an effective board which is collectively responsible for the long-term success of the company. The board is responsible for providing entrepreneurial leadership of the company within a framework of prudent and effective controls that enables risk to be assessed and managed. The board should set the company’s strategic aims, ensure that the necessary financial and human resources are in place for the company to meet his objectives and review management performance. The board should set the company’s values and standards and ensure that its obligations to shareholders and others are understood and met. But the...
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...The case of Enron Corporation and Andersen, LLP can be noted as one of the most infamous fraud scandals in US history. Investors lost millions of dollars and ruined the public’s trust. Enron was once the seventh largest public company in the United States and Andersen LLP was the world’s largest and most respected business organizations. Enron’s stock prices soared to approximately $100 to less than $10 in 2001. How did these two big giants fall into oblivion and what could have been done to avoid the disaster of these companies? Enron Corporation was formed as the result of the July 1985 merger of Houston National Gas and InterNorth of Omaha, Nebraska. Their headquarters were located in Houston, TX. In its earlier years, Enron was a natural gas pipeline company whose primary business strategy involved entering into contracts to deliver specified amounts of natural gas to businesses or utilities over a given period of time. Enron soon became involved in in the transmission and distribution of electricity in addition to gas in the US as well as the development, construction, and operation of power plants and pipelines worldwide. Enron’s CEO was Jeffrey Skilling who only held his position for six months and Kenneth Lay, who was the CEO/Chairman of Enron from 1996 through 2001, was reinstated to CEO after Skilling’s resignation due to “purely personal” reasons. Andersen. LLP was originally founded as Andersen, Delaney & Co. in 1913 by Arthur Andersen, an accounting professor...
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...1. Enron, an international energy company, faced a lot of business risks because of the industry they were in. Enron’s business model, an intermediary between buyers and sellers of energy and profiting off the price differences, was risky in itself because it exposed Enron to energy prices risks as well a fluctuating foreign currency. While continuing to expand their business, Enron began offering a variety of financial hedges and contracts to their customers. This new venture uncovered interest rate risks, environmental risks, and constant price wars. Enron Online launched in 1999, which revealed dangerous technological failure risks. Enron decided to use Special Purpose Entities for borrowed funds. These SPEs were a great risk because the likelihood of materially misstating their financial statements increased significantly due to liabilities not being reported as cash inflows were coming in. These SPEs, as well as many other business endeavors by Enron, relied heavily on their guarantees of stock. If stock prices were to fall under a certain level, obligations made by Enron would become payable (Seabury). Once Enron’s risks were realized the company experienced pressure to report more stable and prosperous financial statements. They wanted to continue attracting investors and increase their competiveness in the marketplace, which drove management to enter into aggressive accounting schemes that ultimately led to their downfall in 2001. 2. The case explains how Enron...
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...Case Analysisof Enron Corporation In: Business and Management Case Analysisof Enron Corporation Name: Janet P. Cambangay Section & Year: BSBA-I Teacher: Sir Zadrack B. Fiel Subject: Management 1 Time Session: 2:00pm-5:00pm 07/23/2011 Weekend Class CASE STUDY I. TIME CONTEXT Regular Staff Meeting (TODAY) II. VIEWPOINT The different considerations being made by every section which results the 40% failure rate in selecting supervisors. In regards, with this, the department manager stabilizes that having a best technical people is just a trouble. It may only lead people to spend their time for technical works only which caused incompetency to manage. Second, is that the basis of seniority will only ignores everything learned about managing and it is unrealistic that the when the candidates get the job he will become capable and proficient in management. III. STATEMENT OF THE PROBLEM The poor quality of the twenty supervisors reporting to the section heads due to poor record in selecting good supervisors. IV. OBJECTIVES * Supervisors must have a high standard in terms of their performances, knowledge and skills in business management. * The promotion of supervisors must base with their capabilities and unique approach to their responsibilities in managing the business. * An excellent supervisor must gain the skills in management, technical and conceptual skills of business supervision. V. AREAS OF CONSIDERATION/ANALYSIS ...
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