...Introduction Enron was a landmark case that taught the business world more about ethics. The company’s accounting procedures were not effective in keeping the company’s book accurate. By showing a high amount of cash flow and a low amount of debt, Enron looked great to investors, but in all reality the company was in trouble. A great example of Enron’s problematic accounting procedures is in 2000 when the company reported $3 billion in cash flows when it actually had negative $154 million. (Ferrell, Fraedrich, and Ferrell 487) Not only did Enron’s accounting procedures cause trouble within the company, but also the people that were in charge. Chief Executive Officer Jeffrey Skilling, put in a system where employees were rated every six months and the bottom 20 percent were fired. Shilling called the system, “rank and yank.” (Ferrell, Fraedrich, and Ferrell 487) This system held employees to a higher standard. It helped them reach their full potential no matter what they had to do to reach it, ethical or unethical. Similar to most scandals of this size, Enron was not the only company involved in the fraud. In their case, their law firm, banking partner, and auditors were all questioned for their role in the scandal. Our statement was “Enron’s bankers, auditors, and attorneys contributed to Background 2 After reading about the Enron case, our issue of whether or not “Enron’s bankers, auditors...
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...* Enron Questionable Transactions Question 1 The question which segment of its operations got Enron into difficulties is simple to answer, everything. Almost every all segments of their operation were improper. First of all, they practice unethical and dishonest practices which victimized workers, consumers, taxpayers and stockholders. Enron created partnerships within their own organization which led to them creating new financial instruments, called SPE’s (special purpose entities) which was used to falsify the accounting. The improper financial reporting was to make the company look good, instead of assuring that the figures are accurate and reliable. Enron's legal department wrote up contracts that were irregular. Enron executives were so focused on the pursuit of profits, regardless of economic fundamentals. Enron had excesses of difficulties and they also cause their law firm and accounting firm to become involved in a web of dishonesty. Question 3 All of Enron’s directors were involved in the dishonest scheme and they understood how profits were not honorable. One of the directors, Andrew Fastow who was responsible in creating many of the partnerships such as JEDI, Chewco, Kopper & Dodson’s and Dodson Companies knew exactly how the profits were being made along with several other directors such as Ben F. Glisan, Jr., Jeffrey K. Skillings who was on the board of directors. These directors were all part of a financial scheme to continue to...
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...A CASE ANALYSIS Of Enron SUBMITTED IN PARTIAL FULFILLMENT OF MBAC422: Business & Society Case 2 BY RAHUL DADA 2011H149219 UNDER THE SUPERVISION OF Prof. Anil K Bhat & Dr. Sarvesh Satija Management Department BIRLA INSTITUTE OF TECHNOLOGY & SCIENCE PILANI, RAJASTHAN – 333031 1 Introduction Enron Corporation 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 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 it’s 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 questions the accounting practices and activities of many corporations throughout the United States and was a factor in the creation of the Sarbanes–Oxley Act of 2002. The scandal also affected the wider business world by causing the dissolution of the Arthur Andersen accounting firm. The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company...
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...The Collapse of Enron Assessment Task A brief introduction outlining the key facts in the selected case On December 2nd 2001 the largest bankruptcy in US history was filed by energy trader, Enron Corporation. Once regarded as one of the fasted growing, innovative and best managed businesses in the United States, the collapse of the energy giant highlighted a series of corrupt and criminal activities that were, according to several investigations, rife throughout Enron’s operations. Enron Corporation was formed in 1985 from a merger of Houston Natural Gas and Internorth. Enron held the title of operating the first nationwide network of natural gas pipelines in the United States as a result of the merger. Created on the basis of operating a regulated network for the transport of natural gas, Enron’s operating aim shifted during the early 1990’s to a new central focus. The corporation’s new focus was now in the unregulated energy trading markets of the United States. Until late 2001, nearly all observers- including professional Wall Street analysts- regarded this transformation as an outstanding success. (Jickling 2002, p1) Throughout the 1990’s Enron’s annual revenues grew significantly. In the early 1990’s, Enron’s annual profit was reported to be under $10 billion before ballooning to $101 billion in the lead up to 2000. By autumn of 2000, Enron was starting to crumble under its own weight. (Seabury 2003, p1) Enron’s CEO, Jeffery Skilling, who oversaw the company that...
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...Raul E Guzman Legotte Jr Leonard ITT Technical Institute AC1320 02-22-2015 One of the 10 Worst Corporate Scandals of All Times From the 1990's until the fall of 2001, Enron was famous throughout the business world and was known as an innovator, technology powerhouse, and a corporation with no fear. The sudden fall of Enron in the end of 2001 shattered not just the business world but also the lives of their employees and the people who believed that their soar to greatness was genuine. Their collapse was followed by a series of revelations on how they manipulated their success. Introduction Enron shocked the world from being “America’s most innovative company” to America's biggest corporate bankruptcy at its time. At its peak, Enron was America's seventh largest corporation. Enron gave the illusion that it was a steady company with good revenue but that was not the case, a large part of Enron’s profits were made of paper. This was made possible by masterfully designed accounting and morally questionable acts by traders and executives. Deep debt and surfacing information about hiding losses gave the company big problems and in the late 2001 Enron declared bankruptcy under Chapter 11 of the United States Bankruptcy Code. Many factors affected Enron's surge to the top and its sudden fall. In this report we will discuss and present what we think were the main reasons of their rise and fall. Enron’s surge to the top From energy to trading Kenneth Lay was one of the key spokesmen...
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...SIGN UP Enron Duraines Sankar UPLOADED BY Duraines Sankar VIEWS 705 DOWNLOAD Duraines Sankar (4943521) TUTORIAL 2 1) What were the individual factors that contributed to the failure of Enron? Briefly explain two key factors. In the repercussion of Enron‘s bankruptcy filing, numerous Enron executives were charged with criminal acts. Those charges were fraud, insider trading and money laundering. Enron was described as ―House Of Cards‖ as it was built over a pool of gasoline. It all sor t of became smoke and mirror. Louis Borget, former Enron's CEO was also exposed to be rerouting company ‘s money to offshore accounts. Once their schemes were discovered by the auditors, Kenneth Lay encourages them to "keep making us millions". However, the traders were fired once it was revealed that Enron's reserves were gambled away which nearly destroyed the company. After these facts were brought to light, Ken Lay denies having any knowledge of wrongdoing. Needless to say, when required to testify before the U.S. Congress on the reasons for Enron ‘ s collapse, Ken Lay, Jeff Skilling and Andrew Fastow, sought refuge under the Fifth Amendment. Andrew Fastow, Jeffrey Skilling, and Kenneth Lay are among the most notable top-level executives implicated in the collapse of Enron‘s. Kenneth Lay, the former chairman of Enron was prosecuted on 11 criminal counts of making misleading statements and fraud. Jeff Skilling, former Chief Executive Officer (CEO) of Enron was charged...
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...ACCTG 641 15 October 2014 The Meteoric Rise and Fall of Enron Enron was created in 1985 after a merger between Houston Natural Gas and Internorth. By 2002 it was gone forever. Its stock price rose to $90/share in August of 2000 before bottoming out at $0.40/share when they filed for bankruptcy on Dec. 2nd 2001. It only took 16 years for one of the largest Fortune 500 companies to completely dissolve, taking employee jobs, pensions, Arthur Andersen, and the American public’s faith with it. Enron and its young McKinsey consultant created the energy derivative and used it to form the new natural gas division that dominated the market. However, the use of mark-to-market accounting and the creation of Special Purpose Entities (SPEs) led to overstated profits and inaccurate balance sheets. By the fall of 2001 nobody could find out how Enron was making its money. A disclosure on the October financial statements for a $1.2 billon dollar reversal caught the Security and Exchange Commission’s (SEC) attention. They launched an investigation and in less than two months Enron filed for bankruptcy protection. A large part of the scandal also focused around Arthur Andersen, at the time of the of the Big Five accounting firms, because of its qualified auditing opinions of Enron. It ultimately ceased to exist because of its involvement with the Enron fraud. The Enron scandal showed the public that changes in accounting and auditing standards and practices were needed, and it was...
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...The Enron scandal Tobias Pavel 910422 Mylene Encontro 850224 Chalmers University of Technology Finacial Risk, MVE220 Examiner: Holger Rootzén 2012-12-02 Göteborg This report has been written and analyzed by both group members jointly. Abstract From the 1990's until the fall of 2001, Enron was famous throughout the business world and was known as an innovator, technology powerhouse, and a corporation with no fear. The sudden fall of Enron in the end of 2001 shattered not just the business world but also the lives of their employees and the people who believed that their soar to greatness was genuine. Their collapse was followed by a series of revelations on how they manipulated their success. Introduction Enron shocked the world from being “America’s most innovative company” to America's biggest corporate bankruptcy at its time. At its peak, Enron was America's seventh largest corporation. Enron gave the illusion that it was a steady company with good revenue but that was not the case, a large part of Enron’s profits were made of paper. This was made possible by masterfully designed accounting and morally questionable acts by traders and executives. Deep debt and surfacing information about hiding losses gave the company big problems and in the late 2001 Enron declared bankruptcy under Chapter 11 of the United States Bankruptcy Code. Many factors affected Enron's surge to the top and its sudden fall. In this report we will discuss and present what we think...
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...task Enron: How the Failure of Leadership, Culture, and Unethical Behavior Brought a Giant to its Knees Background A company with humble beginnings, Enron began as a merger of two Houston pipeline companies in 1985. Although Enron faced a number of financially difficult years, the deregulation of the electrical power markets took effect in 1988, and the company redefined its business from "energy delivery" to "energy broker." Enron quickly changed from a surviving company to a thriving one. Deregulation allowed Enron to become a matchmaker in the power industry, bringing buyers and sellers together. Enron profited from the exchanges, generating revenue from the difference between the buying and selling prices. Deregulation allowed Enron to be creative—for the first time, a company that had been required to operate within the lines could innovate and test limits. Over time, Enron's contracts became increasingly diverse and significantly more complex. Customers could insure themselves against all sorts of eventualities—such as a rise or fall in interest rates, a change in the weather, or a customer's inability to pay. By the end, the volume of such financial contracts far outstripped the volume of contracts to deliver actual commodities, and Enron was employing a small army of Ph.D.s in mathematics, physics, and economics to help manage its risk. As Enron's products and services evolved, so did the company's culture. In this newly deregulated and innovative forum, Enron embraced...
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...In the repercussion of Enron‘s bankruptcy filing, numerous Enron executives were charged with criminal acts. Those charges were fraud, insider trading and money laundering. Enron was described as―House Of Cards‖ as it was built over a pool of gasoline. It all sort of became smoke and mirror. Louis Borget, former Enron's CEO was also exposed to be rerouting company’s money to offshore accounts. Once their schemes were discovered by the auditors, Kenneth Lay encourages them to "keep making us millions". However, the traders were fired once it was revealed that Enron's reserves were gambled awaywhich nearly destroyed the company. After these facts were brought to light, Ken Lay denies having any knowledge of wrongdoing. Needless to say, when required to testify before the U.S. Congress on the reasons for Enron‘s collapse, Ken Lay, Jeff Skilling and Andrew Fastow, sought refuge under the Fifth Amendment. Andrew Fastow, Jeffrey Skilling, and Kenneth Lay are among the most notable top-level executives implicated in the collapse of Enron‘s. Kenneth Lay, the former chairman of Enron was prosecuted on 11 criminal counts of making misleading statements and fraud. Jeff Skilling, former Chief Executive Officer (CEO) of Enron was charged on 35 counts that included conspiracy wire fraud, insider trading, securities fraud, and making false statements on financial reports. Andrew Fastow, former Enron’s Chief Financial Officer (CFO), faced 98 counts of money laundering, fraud, and conspiracy in...
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...ENRON CASE Please read the Enron cases posted on blackboard and the one in your book then answer the following questions based upon the case and Chapter 9. Make sure that your answers are supported by the facts of the case and the concepts you learned from Chapter 5. Please rely only on the case/chapter 9 to answer the questions except for question # 12—requires outside search. Make sure your answers are sufficiently brief, concise, and relevant to the question. Please avoid general, round, and long statements based upon speculations. “Briefly explain” means an explanation requiring 2-5 sentence elaboration of the topic in hand. This is an independent and individual project that should be done by each individual student alone. Any extensive similarities and consistent patterns among students will result in a grade of zero for any student involved in the situation. If you need assistance I should be the source to answer any questions and respond to any concerns regarding the case. It is also not acceptable that the student plagiarizes through internet sources, written documents and reports of others, and etc. Any outside source should be correctly cited with a reference. Each case will be electronically submitted to Safe Assignments on blackboard (Go to assignments tab, click on create assessment, pick safe assignment from the drop down menu and upload your case there). Due date is Thursday Nov 29, 2011. Please bring a hard-copy to the class...
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...Enron: Questionable Accounting Leads to Collapse * Problem Definition * There was a lot of oversight that happened in the company of Enron. The once supergiant energy company suddenly collapsed and it cannot be revived anymore * Performance was highly recognized and failure was gravely penalized. This lead employees to cut corners in order to achieve the desired goal * Delivery of bad news was dismissed and neglected. Only good news were entertained and this lead to employees covering up discrepancies in order to only deliver a good report * Identify Stakeholders * Executives – they dismissed the problems, over project the value of the company and hid the losses on the Special Project Entities * Employees- they worked hard for incentives, cut corners in order to not get penalized. When Enron collapsed, they are very much affected since they bought a lot of stocks with the company hoping that it will rise again * Investors- some of them invested their entire life savings to Enron and when it collapsed, their hopes and dreams collapsed as well * Government- the government had to revisit their policies on the oversight. The Chair and the CEO are saying that they were not aware of any manipulation of the numbers which lead to the appreciation of their stock value * Identify Alternatives Status quo | 1. Stick to the generic purpose of To be the world’s best energy company, and later to be the world’s best corporation...
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...Abstract The accounting services are vital for the success of a business, and their quality is very important, both for the users of accounting information, as well as for the providers of services. I want to highlights through this paper, the characteristics and important quality factors of management accounting that managers need to use during management decision-making process. Accounting information provides managers with data needed to determine whether a business is at a profit or a loss, company’s liabilities, profit and much other financial information. Accounting measures business transactions and it is the right tool that helps managers with actual information and reach decisions on a timely manner. For example, in retail industry through accounting information, managers can determine when sales should decrease or increase. Accounting and financial information are among the most important information widely used in the managerial decisions. In the rapidly changing world nowadays, information technology has become an indispensable part of every organization. The extent to which the information technology affects the decision making process is quite big through which managers are capable to pay attention to the efficiency of their management accounting information systems. A business manager, should identify the handful of critical information variables and need to keep a close eye on the business. All these factors are included in internal accounting reports. Only...
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...Employees look to leaders for cues as to what is truly appropriate behavior. Corporate cultures must reward ethical conduct while penalizing any wrongdoing at all levels in a corporation. Values matter and trying to ignore trouble spots or the blaming of underlings is an unacceptable practice. A company is measured by the traditions they build and the way they manage all their relationships with shareholders, employees, and the communities they live and work in. Enron went bankrupt and disappeared over 10 years ago but the impact it has made on ethical standards have never faded. Thousands of people lost their retirement savings, and the energy industry was greatly affected by the downfall of Enron. The collapse of Enron is now used in many textbooks and research papers as an example of the importance of an organization’s behaviors an how much of impact unethical acts can have from top management all the way to new hires. Company leaders do not always do the right thing, act as positive influencers, or lead the company to do the best thing for all its stakeholders. The actions of the company executives, the culture established, the employee motivations employed, and the company structure all provide signals of whether a company is ethically sound. Enron’s demise sets the stage for a good learning experience for all businesses....
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...THE NATION’S NEWSPAPER BS2003-01a Collegiate Case Study Enron law firm called accounting practices 'creative' By Greg Farrell www.usatodaycollege.com Accounting fraud Part I: The problems “Creative accounting” is not a new technique, but it can certainly be a costly one. Businesses feel the pressure to appear profitable in order to attract investors and resources, but deceptive or fraudulent accounting practices often lead to drastic consequences. Are these so-called creative practices always illegal or can they ever be justified? This case study will present examples of companies who have used inappropriate accounting practices, the results of their deceptions and the government's plan to avoid future incidents. Did banks play role in Enron scandal? By Edward Iwata Banks face accusations in Enron case By Edward Iwata Banks defend e-mail about Enron By Edward Iwata WorldCom finds accounting fraud By Andrew Backover, Thor Vladmanis, Matt Kranz and Michelle Kessler Former controller comes up more often By Andrew Backover and Chris Woodyard Cover story WorldCom’s bad math may date back to 1999 By Jayne O’Donnell and Andrew Backover CFOs join their bosses on the hot seat By Jim Hopkins Capitalizing on oldest trick in book How WorldCom, and others, fudged results By Matt Krantz USA TODAY WorldCom's accounting game is stunning investors who thought the loophole the telecom firm used was sewn shut years ago. Bros. "How was this overlooked...
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