Enron And Its Impact On Enron 's Downfall Essay

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Abstract recent collapses of high profile business failures like Enron,Worldcom,Parmlat,and Tycohasbeen a subject of great debate among regulators, investors, government and academics in the recent past. Enron’s case was the greatest failure in the history of American capitalism and had a major impact on financial markets by causing significant losses to investors. Enron was a company ranked by Fortune as the most innovative company in the United States; it exemplified the transition from the production to the knowledge economy. Many lessons can we learn from its collapse. In this paper we present an analysis of the factors that contributed to Enron’s rise and failure, underlying the role that energy deregulation and manipulation of financial statements played on Enron’s demise. We summarize some lessons that can be learned in order to prevent another Enron and restore confidence in the financial markets, as well as in the accounting and auditing professions.

Introduction

Financial statement analysis is a foremost tool in predicting bankruptcy and probability of business failure. It helps investors and creditors to assess growth rates and income prospects to compare investment alternatives and make financial decisions.However, the Association of Certified Fraud Examiners highlights the frightful fact that companies can manipulate their financial statements. Such manipulation is financial statement fraud which occurs when the financial statements are prepared or reported

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