1) What kind of industry was Enron in? Enron was a public corporation in the energy industry. 2) What did Enron do wrong? The Enron scandal involved an accounting fraudulent scheme in which the company was cooking up the books. 3) When did Enron file for bankruptcy? Enron filed for bankruptcy on December 2, 2001 (History). 4) List the names of the Enron employees that went on trial for the accounting fraud: CEO, COO, CFO, and Treasurer. The names of the top four executives of the company are: CEO – Kenneth Lay COO – Jeffrey Skilling CFO – Andy Fastow Treasurer – Ben Glisan 5) Who was the Public Accounting firm performing the annual financial statement audit for Enron?
The public accounting firm that audited the Enron financial statements was Arthur Anderson. 6) What did the Accounting Firm do wrong? Arthur Anderson colluded with the executive management team of Enron to hide the fact the company was cooking up the accounting books. 7) What other popular accounting scandal was the Accounting Firm involved with? The accounting firm was found guilty of faulty audits of other companies including WorldCom, Sunbeam, and Waste Management. 8) Is the Accounting Firm still in existence?
Arthur Anderson is no longer in business. 9) What congressional act was the result of the Enron and WorldCom scandal? In the aftermath of the Enron scandal the Sarbanes-Oxley Act was passed in 2002. 10) What would you do have done differently if you were the Accounting firm? If I was Arthur Anderson I would have revealed to the SEC the wrongdoings of Enron. The Enron debacle was one of the biggest accounting scandals in the 21st century. The bankruptcy the company filed on December 2, 2001 represented the largest bankruptcy in Unites States history.
The executive management team of the company cooked up the accounting books of the company in order to receive multi-million dollar bonuses. A year before the company revealed the truth about its true finances the Enron common stocks were valued at over $90 a share. A year later the company’s common stock became a penny stock. The deception and fraud the company was able to achieve was incredible considering the fact that during the late 1990’s Enron was named the most innovative company by the Fortune Magazine for five consecutive years.
Two of the key accounting practices that the company used to defraud the public was market to market accounting and off balance sheet liabilities. The market to market accounting practice allowed the company to estimate future earnings. The managers and accountants of the company inflated earnings astronomically. In 2000 the company recognized over a billion dollars in earnings when in reality the company did not make any money. The executive management team of the company colluded with its auditors, Arthur Anderson, to hide the true accounting position of the company for years.
The revelation of the Enron scandal scared a lot of investors. As a consequence the U. S. Congress passed the Sarbanes-Oxley Act of 2002 in order to raise investor confidence in the financial markets. Thousands of investors lost millions of dollars including the employees of Enron which had a pension plan that was funded solely on the value of Enron stocks. Work Cited Page History. com. 2012. “Enron files for bankruptcy. ” 21 February 2012.
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