Enron Questionable Accounting Leads to Collapse - 2056 Words

Enron: Questionable Accounting Leads to Collapse The Enron Corporation was established by integrating two major gas pipelines in 1985. The Company provided products and services related to natural gas, electricity, and communications and it was one of the world’s leading organizations at these sectors with claimed revenues of nearly $101 billion in 2000. Throughout the 1990s, Chair Ken Lay, chief executive officer Jeffrey Skilling and chief financial official officer Andrew Fastow transformed Enron from an old style electricity and Gas company into a $150 billion energy company. However, after the bankruptcy of Enron, it was revealed that Enron used accounting loopholes, special purpose entities and poor financial reporting to hide†¦show more content†¦Moreover, Enron introduced a performance monitoring system where employees were rated every six months. Those who raked in the bottom 20 percent were forced to quit. This ranking system did not boost up the performance of the employees; rather it created a fierce envi ronment where employees competed against rivals not only outside the company but also at the next desk. Delivering bad news could result in the ‘death’ of the messenger, so problems in the trading operation, for example, were covered up rather than being communicated to management. Enron’s corporate culture failed to sustain the organization because it lacked any method of contractual enforcement. Enron’s ethic gave managers no rational justification for choosing ‘honor trust’ over ‘abuse trust’. The Contribution of Enron’s bankers, auditors, and attorneys to Enron’s demise: ‘High risk accounting, inappropriate conflicts of interest, extensive undisclosed off-the-books activity, and excessive compensation’ these are some of the headings of the report prepared by the U.S. Senate s Permanent Subcommittee on Investigations titled The Role of the Board of Directors in Enron s Collapse. (Permanent Subcommittee on Investigations,2002). Enron continuously used partnerships, called ‘special-purpose entities’ (SPEs) with the help of its bankers and auditors to move assets and debts off its balance sheet and to increase cash flow by showingShow MoreRelatedEssay on Enron: Questionable Accounting Leads to Collapse705 Words   |  3 PagesENRON: QUESTIONABLE ACCOUNTING LEADS TO COLLAPSE CRYSTAL RUFF GLOBE UNIVERSITY ABSTRACT This paper summarizes the article listed in reference that reported on the demise of Enron and the contributing factors that led to the financial downfall of a great company. The roles of the corporate culture, Enron’s financial staff, and even the chief financial officer are all to blame for the events that lead to the finality of the company that resulted in bankruptcy. While Enron boasted aboutRead MoreEssay on Enron: Questionable Accounting Leads to Collapse784 Words   |  4 PagesEnron: Questionable Accounting Leads to Collapse In the case of Enron, it comes down to pure greed and a lack of accountability. From the top, there was illegal activity with Ken Lay, Jeffrey Skilling, and Andrew Fastow who raided the company as though it was their own personal bank. On top of that, the culture of the rest of the company was to make as much money as they could and employees were rewarded by the amount of profit they could make without questioning the ethical means to do so. Read MoreCase: 9 Enron928 Words   |  4 PagesCase 9: Enron; Questionable Accounting Leads to Collapse Bruce Smith Minnesota School of Business BS430 Business Ethics MR. Morris November 25, 2012 1. 2. 1. How did the corporate culture of Enron contribute to its bankruptcy? 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