Enron : The Leading Factor That Had Enron Into Its Demise Essay

1608 WordsOct 16, 20167 Pages
The leading factor that had Enron into its demise revolves around the notion that, “companies are often so concerned with appearance and damage control that they are unwilling to engage in the degree of examination required to root out the entrenched causes of trust violations” (Hurley, Gillespie, Ferrin & Dietz, 2013). The historical performance of Enron’s rising share prices, coupled to the constant positive media attentions, only added fuel to the fire in terms of Enron’s competitive culture. As a consequence of these external factors, Enron’s top management felt the need to be able to sustain their image of rapid growth, since negative balances on their financial reports would have been an indication to investors that Enron may not be as successful as it appeared after all, leading to possible negative repercussions towards their overall performance, and potentially inevitably lead to its ill-fated downfall. Therefore to prolong their fate, Enron employed the use of highly questionable accounting methods and the use of deceiving partnerships, such as SPE’s (Special Purpose Entities), with the aim to create a façade that they’re highly successful by shrouding losses, falsifying profits and to conceal debt amounts. The first breach in accounting conduct is evident through their use of mark-to-market accounting Investopedia defines this term as the accounting act in recording the value/price of a given security at its true reflection of the current market value instead of

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