Enron: Questionable Accounting Leads to Collapse

ENRON: QUESTIONABLE ACCOUNTING LEADS TO COLLAPSE

I. TIME CONTEXT

ENRON Corporation Scandal revealed October 2001 that led to bankruptcy. October 2001 Andrew Fastow disclosed the fraudulent accounting practices.The sudden fall of the company not only shattered not only in business world But also the lives of their employees.

II. POINT OF VIEW

Enron was founded in 1985 and originally involved in transmitting and distributing electricity and natural gas throughout United States.Enron also owned the largest network of natural gas pipelines.

Jeffrey Skilling - joined Enron Corporation on 1990 and became the COO on the year 1997.The responsible in implementing market to market accounting in Enron.

Andrew Fastow - Chief Financial Officer ; the brain behind the partnerships used to concealed some money in Enron Debt. He made the complicated financial structures so that Enron can hide their losses and dept.

Kenneth Lay – became the chair CEO of the company that was to become enron in 1986.

Arthur Andersen –Enron’s auditor ; was responsible for ensuring the accuracy of Enrons Financial statement and internal bookkeeping.

III. STATEMENT OF THE PROBLEM

There are various reason why Enron Company leads to Bankruptcy.

1. The Improper trade practices

2. The Accounting Frauds

3. Corporate ethics and culture

4. The Leadership style of top management.

IV. OBJECTIVES

a) To revive the bankruptcy and recovered the losses that the company experience

b) To sanctions the involve persons in the scandal.

c) To implement the code of conduct in Enron’s Company

V. AREAS OF CONSIDERATION

Top Executives are the mastermind of Enron Scandal. The use of market to market accounting .The company’s aggressive accounting has corrupted Enron’s book . Misleading of information were given to Enron’s investor due to the accounting system.

The corporate culture of the company which is heavily influence by the competition where the employees are motivated by the incentive even though they did not perform well.This kind of culture result to an unhealthy competition among employees.

Strength

- Distributor of Major Necessities such as Gas & Electricity

- The largest natural gas merchant in North America

Weakness

- Unethical Competition within the organization

- Corporate ethics and culture

- Net Income are Overstated

- Off-Balance sheet transactions

Opportunities

- Changing corporate culture to avoid harsh employees

- Motivation among employees to reach its highest potential in ethical Manner

- Set Code of Conduct and implement it among employees and top management