Enron And The Enron Corporation

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Nearly all accounting instructors utilize the so-called “Enron Scandal” as a means to educate students on accounting ethics and how regulations in the accounting world were enacted. The 2001 scandal involved two parties: Enron Corporation, a U.S. energy commodities firm, and their auditors Arthur Andersen, LLP, currently a U.S. holding company and formerly one of the “Big 5” U.S. accounting firms. When the scandal broke, Enron was one of the most innovative companies in the world and Arthur Andersen was the biggest professional services company in the world; so, when both companies fell, it completely changed the world of Accounting. The Enron Corporation was founded in 1985 when Houston Natural Gas merged with InterNorth, a Nebraska based Company. For six consecutive years thereafter, Enron carried the title of ‘Americas Most Innovative company’ (Folger). The reason Enron was regarded as so innovative is that the company completely changed the way the energy industry was run. In 1987, Enron’s CEO Kenneth Lay hired Jeffrey Skilling as a consultant to completely change the business strategy that the company was run on. At that point, the company started taking advantage of the fact that the energy industry was deregulated and “…created a ‘gas bank’ in which Enron would buy gas from a network of suppliers and sell it to a network of consumers, contractually guaranteeing both the supply and the price, charging fees for the transactions and assuming the associated risks”

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