The Case Analysis of Enron Scandal

3111 Words Apr 28th, 2011 13 Pages
www.ccsenet.org/ijbm

International Journal of Business and Management

Vol. 5, No. 10; October 2010

The Case Analysis of the Scandal of Enron
Yuhao Li Huntsman School of Business, Utah State University, Logan city, U.S.A E-mail: wyl_2001_ren@126.com, carolee1989@gmail.com Abstract The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron undoubtedly is the biggest audit failure. It is ever the most famous company in the
…show more content…
Why the delay? The stock was sold to the company to repay money that the CEO owed Enron—and the sale of company stock qualifies as

Published by Canadian Center of Science and Education

37

www.ccsenet.org/ijbm

International Journal of Business and Management

Vol. 5, No. 10; October 2010

an exception under the ordinary director and officer disclosure requirement. It does not have to be reported until 45 days after the end of the company’s fiscal year. (The Conference Board, Inc., 845) 2.2 Interest It has been suggested that conflicts of interest and a lack of independent oversight of management by Enron's board contributed to the firm's collapse. Moreover, some have suggested that Enron's compensation policies engendered a myopic focus on earnings growth and stock price. In addition, recent regulatory changes have focused on enhancing the accounting for SPEs and strengthening internal accounting and control systems. We review these issues, beginning with Enron's board. (Gillan SL, Martin JD, 2007) The conflict of interest between the two roles played by Arthur Andersen, as auditor but also as consultant to Enron. While investigations continue, Enron has sought to salvage its business by spinning off various assets. It has filed for Chapter 11 bankruptcy, allowing it to reorganise…

More about The Case Analysis of Enron Scandal