Accounting Scandals Of Enron Company

Satisfactory Essays

Baasit 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 their stock because of deals they made with the company. This later caused a lot of these employees to lose their life savings and everything they had worked for. Enron used a very complex accounting method to trick the stock market. This method was called “mark to market” accounting. Enron used this method of accounting to predict and project their earnings in a long term period. These earnings were projected based on the long term energy contracts Enron was going to make. This could have been money that was not made at that point. This made Enron’s stock price skyrocket at a very fast pace, making a lot of employees and general public invest in the stock. Enron stock seemed to be a very secure and profitable investment which would make people lots of money. The Fortune 500 company went down very quickly. In August of 2001, the CEO of Enron, Jeffrey Skilling resigned. He randomly resigned and a lot of suspicions arose. His resignation was described to be because of personal reasons.

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