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, and attorneys contributed to Enron’s demise,” had many relevant facts. The first facts

that are known about the issue are that Enron reported revenues from 1998-2000 which made

Enron the 7th largest Fortune 500 company. The company also claimed it had $3 billion in cash

flow in 2000, when it had actual cash of negative $154 million. To hide losses and increase cash,

Enron used