Enron And The Enron Scandal

2247 Words Dec 8th, 2014 9 Pages
In every single accounting or ethics class, the “Enron Scandal” as a lot might say is brought up to teach all the students a lesson about ethics and how regulations in the accounting world were enacted. The “Enron Scandal” dealt with two parties, first Enron itself, and then their auditors Arthur Andersen. Enron used to be one of the most innovative companies in the world, and Arthur Andersen was the biggest professional services company in the world, so when they both fell after the so called “scandal” it completely changed the world of Accounting. The road to multi-million dollar companies failing is a big one so how exactly did it happen. It all had to do with the way Enron and Arthur Andersen were run and changed which ended up in the …show more content…
Another big hit was Enron Online, the financial online commodity market place. Because of Enron’s innovative technologies, it was able to become a successful firm, “including a record high stock price of $90.56 a share in August 2000,” but with that much innovative technology the process for accounting everything in their financials became a lot more complicated which is why Enron looked at other ways to still look profitable, and handle the complicated financials (Thomas).
A few ways Enron was able to present itself as a high profit company was by using “Special purpose entities or subsidiaries”, a lot created by Andrew Fastow, Enron’s CFO. These subsidiaries “were used to hide a lot of financial losses and risky investments” (Folger). Another way Enron was able to represent itself as a high profit company was by reporting inaccurate trading revenues. Enron “would serve as a middleman on a contract trade, linking up a buyer and a seller for a future contract and then booking the entire sale as Enron Revenue” (Folger). By using these two techniques, Enron was able to hide billions of dollars in debt. However, “the value of the assets in these partnerships fell, so Enron began to incur larger and larger obligation to issue its own stock down the road” (Thomas). Due to the value of the assets in the partnerships falling, Enron found it harder to keep hiding debt in these partnerships.
The downward spiral into Enron’s fall began in August 2001, when Skilling resigned as

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