Enron Essay

1433 Words Apr 26th, 2011 6 Pages
An Explanation of the Causes and Effects of the Enron Accounting Scandals

Name: Do Minh Tam
Class: MEP 100
Lecture: Karen Bird
Date: December 24, 2010

Introduction

Background
From the 1980s until now, there have been a lot of accounting scandals which were widely announced on by media. The result of this situation is many companies were bankruptcy protection requests, and closing. One of the most widely reported emulation of accounting scandals is Enron Company. Enron Corporation is one of the largest energy companies in the world. Enron was founded in Houston, Texas, America in July 1985 by the consolidation between Houston Natural Gas and InterNorth of Omaha, Nebraska (“Enron and Enderson: The story”, n.d.). According to
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Endrew and his wife got benefits from Enron to buy Chewco where his wife is owner. He controlled subsidiary companies to buy stock and hid debt for Enron. Enron did not follow the accounting rules. Every mistake in accounting needs to note and describes for shareholders know, and writes on the financial statements. In 2001, Accountants cannot combine Chewco into the Enron’s financial statement. This lead to misunderstanding report which show the financial statement of Enron such as a decrease Enron income and an increase Enron’s reported debt. In addition, Enron tried to make maximize profits by break the law. Therefore, dishonesty in the financial statement, corruption and a lack of knowledge and skills of accountants are the causes of the Enron’s bankruptcy.

The Effects of Enron Accounting Scandal on

Employees and shareholders
When Enron was bankrupt, the most affected people are Enron’s workers and shareholders. Many people lost their jobs, their whole pension and all of the shareholders lost their money (Dunder,n.d.). According to Raver (2006, p4-5), Enron stocks prices were increased nearly double in one year by many ways such as legal and illegal way. The stock price was increasing so fast, many Enron employees bought Enron stock as saving money, and also their pension are in Enron’s stock too. When Enron was failing, Enron’s stock

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