Reasons Why Enron Collapse Essay

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1.3.2 Reason why Enron collapse 1. Accounting Fraud They decentralize their operation into few sub division and fake corporations, so Enron can hide tremendous derivative losses that would affect its growth, if the losses is disclosed. Public traded corporations have to show their financial statements clear to the public, but Enron's finances were a edited transactions between itself and its sub division that use to cover up its true financial state. In another words, all the lost and debt were cover up by subsidiary companies, but the assets are still stated (Nicholson, 2015). 2. Fallout from Fraud Enron fake their financial statement and make it seems positive compare to its true value, therefore Enron Corporation was one of the favorite in Wall Street. That’s the reason why there are able to get non-stop financial support and expand into different impossible ventures. The company stock grow really fast like flying…show more content…
This meant that WorldCom's earning might not meet Wall Street minimum requirements. So in order to increase their revenue, WorldCom moved $2.8 billion into the revenue line of its financial statements. However this was not enough to meet the earnings that WorldCom wanted. So they classify operating expenses as long term capital investments to hide these expenses in such way to give them another $3.85 billion. These newly classified assets were expenses that WorldCom paid to rent other companies phone network lines to utilize their networks. Furthermore WorldCom also added a journal entry for $500 million in computer expenses, but supporting documents for the expenses were not found. And these helps WorldCom's turned losses into profits to the tune of $1.38 billion in 2001. It also made their assets looks more attractable to the public (Obringer,
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