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Enron Of The Sarbanes Oxley Act Essay

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Enron was a U.S. based energy-trading company. At its height of operation in the early part of 2001, it was booking revenues of about $140 billion (Enron Ethics). At the end of 2001 it declared bankruptcy. The Enron bankruptcy was the largest corporate economic failure at that time, and still remains an example of how corrupt practices magnify in the long run. What led to Enron’s failure was primarily a lack of ethics, and poor accounting practices. This scandal was one of the reasons that new regulations were passed for financial reporting standards, the Sarbanes-Oxley Act was passed in 2002 as a means of stopping such a collapse in the future. According to the movie, Enron: The Smartest Guys in the Room, Kenneth Lay was no stranger to corporate scandal. In 1987 the president of the Valhalla office in New York, Louis Borget, was found out to be making risking trades, destroying trade documents, and keeping two sets of accounting books. He was not fired by Lay after Lay was informed of the wrongdoing, but later convicted and sent to jail. Jeff Skilling was hired in 1990, and decided to change Enron’s accounting method to mark-to-market accounting. This allowed them to book assets and liabilities at their fair value based on the current market price. This method was approved by the Securities and Exchange Commission and signed off on by Arthur Anderson, Enron’s accounting firm. This practice allowed Enron to report items at whatever they felt fair value was, which was often
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