Enron Accounting Scandal - 1096 Words

Enron was originally a pipeline company in Houston, Texas in 1985. Enron became a company that was able to profit by providing deliveries of gas to utility companies and businesses. As the deregulation of electric power rose, Enron diversified the business and entered into an energy broker, which traded electricity and other types of commodities. Enron employed several highly qualified PHDs in mathematics, physics, and economics. Enron continued to enter into contracts with customers and utilized a group of skilled employees to interpret, manage, and confine the high risks Enron was taking. Enron’s attempt to create a collection of partners that would permit employees to shift debt and losses off of the books would soon come to an†¦show more content†¦The greatest disadvantage of the mark-to-market system is that once already in use by a company it is very hard for the company to change its direction of systems. Enron had many SPE’s that it used to help defraud the company. Emerging Issues Task Force (EITF) created in the 1990’s help Enron maintain and conceal the SPE’s. EITF only required 3 percent of capital/assets to be contributed by independent external sources in order for a SPE to exist. Albrecht, a PhD in the AICPA (American Institution of Certified Public Accountants), states in his report: EITF 90-15† (The 3% rule) Allowed corporations such as Enron to â€Å"not consolidate† if outsiders contributed even 3% of the capital (the other 97% could come from the company.) 90-15 was a license to create imaginary profits and hide genuine losses. FAS 57 require disclosure of these types of relationships (FAS 57 was proposed and implemented after the Enron scandal). Enron had a $597 million dollar cash flow in the first half of year 2000 by taking loans out from banks such as Citigroup and Morgan- Chase totaling nearly 3.4 billion. Just in interests alone, Enron was collected 2 million dollars each day. The damage incurred in the monetary form, was seen through the stockholders, employees, and other companies involved. Employee pension plans could not be paid, investors watched the stocks fall to $0.09 cents perShow MoreRelatedAccounting Scandals And Enron Accounting Scandal1596 Words   |  7 Pagespaper I will be examining accounting scandals, specifically the Enron Accounting Scandal. First, I will be exploring the history of Enron. Then I will be going into further depth on what accounting issues Enron faced and then I will be explaining what a derivative is. Finally yet importantly, I will consider the different types of Accounting Fraud following a conclusion. Accounting Scandals are born due to collective greed and corporate arrogance. In the case of Enron there was a lot of euphoriaRead MoreEnron Accounting Scandal1706 Words   |  7 PagesThe Enron Accounting Scandal of 2001 There are many accounting scandals that have occurred throughout United States History. Many scandals occur even without outsiders knowing anything that had occurred. Companies try their best to keep many of the accounting scandals quiet. Everyday, there are political and business fraud happening, and most of it goes unnoticed. No company wants to admit that there was a problem or that people within the company are not trust worthy. However, when executivesRead MoreEnron Accounting Scandal1927 Words   |  8 PagesENRON ACCOUNTING SCANDAL The Scandal In the history of accounting, Enron scandal means more than just a legend of accounting managements. It exceeds every other accountings deceit, because the need to secrete its real economic situation was not just a matter of hiding failures borne out of unsuccessful business protrusions. In our summary of the ten major accounting scandals that altered the business world, Enron led the set of white collar crimes committed out of pure gluttony (McLean PeterRead MoreAccounting Scandals And The Enron Corporation1721 Words   |  7 PagesAccounting scandals have happened in numerous companies. In one major case, the firm filed for bankruptcy, and many of its workers lost their jobs, savings, and investments from stocks. This major epidemic happen at Enron, an energy firm stationed in Houston, Texas founded by Kenneth Lay in 1986 (Frontain). On December 2, 2001, the Enron Corporation, an apparently strong and booming business, fell to an all-time low by shocking the world when it filed for bankruptcy protection. Many people wereRead MoreAccounting Scandals. ENRON, WORLDCOM1894 Words   |  8 PagesENRON Enron shocked the world from being â€Å"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 aboutRead MoreAccounting Scandals Of Enron Company1070 Words   |  5 PagesBaasit Kazi Ms. Bogert College Accounting 1-1B 28 April, 2015 Accounting Scandals Reflection Enron was founded in July of 1985. Enron was an electricity and natural gas company which was a fortune 500 company and it was ranked the sixth largest energy company in the world. Enron’s stock went from a peak of $90.75 to $0.67. This was very detrimental to stockholders. Enron’s top executives sold their stock a long time before the stock price fell. A lot of lower level employees could not sell theirRead MoreEnron And The Collapse Of Enron1254 Words   |  6 Pagesone dollar. This happened to shareholders of Enron. The total debt amounted to over $ 16 billion, which was the largest corporate bankruptcy in American history. Shareholders lost 60 billion dollars within a few days, 4500 employees lost their jobs, and the employees lost billions in pension benefits. I had never heard the name of Enron nor Enron’s scandal until I watched a film, â€Å"Enron: The Smartest Guys in The Room,† but I realized the Enron scandal affected the whole of the business in the UnitedRead MoreEthics Standards And The Field Of Accounting950 Words   |  4 Pagesnecessity in the field of accounting. Businesses rely on accountants to accurately report their financial information and give sound advise and consultation in regards to their business. There are standards and rules set in place to ensure that ethics and information is reported accurately. Laws and repercussions are created place to deter unethical and illegal accounting practices, although it still occurs in the business world on many levels. The field of accounting has a code of ethics forRead MoreThe Enron Scandal And Its Impact On The Business World1320 Words   |  6 Pagescan often times become a second priority behind the gaining of profits and success as a company. This is the controversial issue that led to the Enron scandal and ultimately the fall of this company. Enron Corporation was an energy company, and in the peaks of their success, they were the top supplier of natural gas and electricity throughout America. Enron Corporation came about from a merger between Houston Natural Gas and InterNorth. Houston Natural Gas was a gas providing company formed in HoustonRead More Deception, Fraud, and the Collapse of Enron Essay1394 Words   |  6 Pagesand the Collapse of Enron Introduction From America’s 7th most valuable company in December 2000, to a company in ruins by early 2002, Enron has been involved in one of the most incredible reverses of fortune ever. With shares riding high on Wall Street at $84.87 on the 28th December 2000, and awards such as â€Å"America’s most innovative company† from Fortune Magazine 6 years running, and â€Å"Energy Company of the Year† from the Financial Times also in 2000, it looked as though Enron were promising to