ENRON CORPORATION CASE AND THE ESTAFA OF THE CENTURY
Introduction
Enron Corporation was an American energy company based in Houston, Texas. It was founded in 1985 by the fusion of two Houston Natural Gas and Inter North corporations. Enron traded with products and services that included natural gas, products, paper, load, water and communication technology. What happened in the Enron company was the bad audit practice. This practice was carried out when the company’s staff and auditors were responsible for hiding the debt of financial reports and statements for investors to continue buying the capital of the company. The losses began to occur when Enron closed the agreement with Blockbuster and reported profits despite the losses. Enron made use of vehicles and entities for special purposes to hide their debts and losses in order to save the interests of investors. Investors presented a case against the company after Merrill Lynch discovered the fraudulent activities of Enron. The project taken from box office successes and assets could not generate income and the company did not report it. This creative accounting was implemented as a trick per Enron to hide non -profitable activities. The investors who invested in Enron actions faced losses and the creditors who provided credits did not obtain returns. The scandal led to the bankruptcy of Enron, as well as to the dissolution of the firm Arthur Andersen.
Developing
Many Enron executives were accused of privileged information trafficking, security and conspiracy frauds and were then imprisoned. The people who were involved in the case were, the SR. Jeff Skilling (Executive Director) and SR. Andrew Fastow (Financial Director). Both were the main actors in this scandal. The other parties involved were customers, suppliers, government, employees and shareholders. Accounting companies and consultants involved in advising companies also suffered loss of credibility.
Due to the sometimes complex nature of financial affairs, many may not be familiar with the details of the Enron case or the role of Arthur Andersen. Arthur Anderson was Enron’s auditor and helped Enron to commit fraud through the application of reckless standards in the audit. Arthur Anderson was not only the Enron auditor, but also provided advice to the firm. Therefore, there was a clear conflict of interest. Through the Arthur conflict he avoided providing negative audit reports for the company. This led to severe damage in the reputation and goodwill of Anderson when his role became public knowledge.
They used several tactics such as: Income recognition: recognizing income before they accumulate or obtain. Therefore, the results status looked just despite not being. Special purpose entities: ENRON used special purpose entities that are limited societies or companies created to fulfill a temporary or specific purpose to finance or manage risks associated with specific assets. These were out of balance to hide incompetent assets. Corporate Governance: Excessive Executive Compensation through actions on actions to manufacture the price of shares, inadequate financial audit, incompetent audit committee, since they had irregular meetings and the members did not have full knowledge of accounting.
Sherron Watkins, a company official, discovered fraud and first went to his boss and mentor, founder and president Ken Lay, to inform about the alleged accounting and financial irregularities. Watkins realized the problems of financial information in her company when observing the questionable elements while she did her usual work activities. She was ignored more than once and finally went to the press with her history. There were many consequences based on the discovery of Wakins: the people involved in fraud were arrested. The company was sued due to obstructionism. The company declared bankruptcies for the year 2001. In the bankrupt. Enron’s financial crisis seriously affected US and World Securities markets. Company employees lost their jobs and retirement funds. The trust of citizens in the American economic system was destroyed. The audit firm Arthur Andersen lost its accreditation.
conclusion
I think that the best conclusion that can be taken out of this story is that sometimes things go wrong easily and sometimes it takes longer for that, but if illegal things are done there is always a great possibility of going wrong. In the case of Enron, the decision makers did not notice gradual changes over time and the arthur and Andersen auditors did not notice how low enron had fallen in terms of their unusual ethical decisions. This was due to lack of integrity, since a sense of personal integrity is very important for an organization employees. The lack of integrity of an organization’s staff is the most common reason behind the ethical problems that occur in companies such as Enron. Finally, I understand that, to avoid conflicts similar to the case of Enron, government regulations and norms of all countries must be updated to make better decisions in the new economy.
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