Enron accounting scandal essay

Along with a new idea that these companies and the people who run them, like coe and cfo, be held responsible for there actions. Economic analyzes were predicting that the market impact would prove to be modest and temporary.

Predicting that the worst of the aftermath is over and the market should near or pass pre-Enron levels. This prediction may have been accurate if not for the September 11 attacks and the two recent and ongoing public wars in Iraq and Afghanistan.

ENRON's Accounting Scandal

Coupled with the numerous, not so public, mini wars being waged in various other parts of the world. An investigation by the SEC and various other agencies found almost 3. These hidden expenses include but are not limited to: listing company expenses as capital expenses, which are not reflected in the company earnings results and improper transfer that were not made in acc Continue reading this essay Continue reading.

Toggle navigation MegaEssays. However, in the year , the company became insolvent.

This rendered more than employees redundant. The company majored in electricity, communications, natural gas, paper and pulp. The Enron scandal was one of the most publicized accounting frauds in America. This was in towards the end of During this period, it was established that Enron was giving a false financial picture. This means that, the financial condition the people gave was an institutionalized creative and systematic accounting fraud.

Extract of sample "He Enron Accounting Scandal"

The scandal raised questions about the accounting practices corporations indulge in to deceive their clients and shareholders. As a result, the entire business world was affected primarily since the dissolution of the Arthur Andersen accounting firm. This type of accounting enabled Enron to write off unprofitable activities without hurting its bottom line. The mark-to-market practice led to schemes that were designed to hide the losses and make the company appear more profitable than it really was.

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The primary aim of these SPVs was to hide accounting realities rather than operating results. The standard Enron-to-SPV transaction would be the following: Enron would transfer some of its rapidly rising stock to the SPV in exchange for cash or a note. In turn, Enron would guarantee the SPV's value to reduce apparent counterparty risk.

Although their aim was to hide accounting realities, the SPVs were not illegal. But they were different from standard debt securitization in several significant—and potentially disastrous—ways.

Enron Essays: Examples, Topics, Titles, & Outlines

One major difference was that the SPVs were capitalized entirely with Enron stock. This directly compromised the ability of the SPVs to hedge if Enron's share prices fell. Just as dangerous as the second significant difference: Enron's failure to disclose conflicts of interest. Eventually, Enron's stock declined.

The values of the SPVs also fell, forcing Enron's guarantees to take effect.

He Enron Accounting Scandal - Essay Example

Duncan, who oversaw Enron's accounts. However, despite Enron's poor accounting practices, Arthur Andersen offered its stamp of approval, signing off on the corporate reports for years. By April , many analysts started to question Enron's earnings and the company's transparency.

By the summer of , Enron was in freefall. By October 16, the company reported its first quarterly loss and closed its "Raptor" SPV so that it would not have to distribute 58 million shares of stock, which would further reduce earnings. A few days later, Enron changed pension plan administrators, essentially forbidding employees from selling their shares for at least 30 days.

Fastow was fired from the company that day. Also, the company restated earnings going back to By December 2, , Enron had filed for bankruptcy.

Enron Accounting Fraud

The company's new sole mission was "to reorganize and liquidate certain of the operations and assets of the 'pre-bankruptcy' Enron for the benefit of creditors. Its last payout was in May Arthur Andersen was one of the first casualties of Enron's prolific demise. In June , the firm was found guilty of obstructing justice for shredding Enron's financial documents to conceal them from the SEC.

The conviction was overturned later, on appeal; however, the firm was deeply disgraced by the scandal and dwindled into a holding company.

The Enron Scandal

A group of former partners bought the name in , creating a firm named Andersen Global. Enron's founder and former CEO Kenneth Lay were convicted on six counts of fraud and conspiracy and four counts of bank fraud. Prior to sentencing, he died of a heart attack in Colorado. He ultimately cut a deal for cooperating with federal authorities and served more than five years in prison. He was released from prison in