Enron Scandal

1477 Words Apr 13th, 2014 6 Pages
Current issue: Scandals in auditing
Enron Scandal
1. Introduction
Accounting scandals are political or business scandals which arise with the disclosure of financial misdeeds by trusted executives of corporations or governments. These days, not too often, these scandals are splashed as headlines across media. Why? Because there are complex groups of stakeholders who might be seriously affected by the scandals. Enron scam was the most remarkable scandal in 20 centuries by their institutionalized, systematic, and creatively planned accounting fraud. The scandal also brought into question the accounting practices and activities of many corporations in the United States. The scandal also affected the greater business world by causing the
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On August 14, 2001, Enron 's CEO, Jeff Skilling, resigned due to "family issues." Enron chairman Ken Lay stepped in as CEO.
5. One example of fraud
Enron`s “too much Off-Balance Sheet Transactions”
Enron used “off-balance-sheet”technique for anytime, for many purposes, because it would enable Enron to present itself more attractively as measured by the ratios favored by analysts and investors. Skillng used securitisation to supply more liquidity and also to clean up the assets that is hardly generating income from it. He also hided most of the debt by securitisation.
So, Enron needed Special purpose entities(SPE) for the securitization purpose. JEDI was one of the SPE. California PERS and Enron invested by $25000m each. As soon as the JEDI established, Enron started to sell energy related stock to JEDI and it grew JEDI by 23% per year on average. It made Skillng`s ECT business bigger and bigger.

6. Consequences for the stakeholders
The key stakeholders affected by the collapse of Enron were its employees and retirees. Stakeholders and mutual funds investors lost $ 70billion market value. Banks were also affected by the meltdown of the company. Not only the stakeholder and bondholder lose out, the confidence in the company also fell. This was the major setback for the company. The actions of Enron management left a deep scare for its 4000 employees which lost out their jobs and also impacted others around them. Some blamed

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