ppt is about how enron scandal happened and subsequent act by US govt

1. 2nd BIGGEST SCANDAL IN CORPORATE WORLD
prepared by.,
Harsha Devatha

2. TOP CORPORATE SCANDAL EFFECTS
WORLDCOM SCANDAL (2002): Inflated assets for $11 billion
which leads to $180 billion losses for investors.
ENRON SCANDAL(2001)
Bernie Madoff Scandal (2008): Tricked investors by $64.8 billion
LEHMAN BROTHERS SCANDAL(2008): Hid over $50 billion

3. ENRON COMPANY
It was founded in 1985.
Formed by Kenneth lay
It was formed as the result of a merger between Houston Natural
Gas and InterNorth (small regional companies in US)
It was one of the world's major electricity, natural gas,
communications and pulp and paper companies.
Fortune (magazine) named Enron "America's Most Innovative
Company" for six consecutive years

4. Scandal
In 2000- Reports revenue of $101 billion
2001(Jan-sept)- Revenue is $138.7 billion
October 2001- The CFO was forced to resign (Andrew fastow )
Oct-Nov 2001- Revised its annual reports from 1997-2001
profits were less than $600million and debts
were more than $628million&more
Nov 2001- Stock collapses
2 Dec 2001- Files a case against ENRON for bankruptcy
1996-2000, Enron's revenues increased by more than 750%, rising from $13.3
billion in 1996 to $100.8 billion in 2000. This extensive expansion of 65% per
year was unprecedented in any industry.

5. Company affairs affecting GAAP
Business entity concept
Principle of conservatism
Objectivity principle
Revenue recognition

6. Sarbanes Oaxley Act
Histor
y
Created by US
Senator Paul
Sarbanes and US
Congressman
Michael Oxley
Signed by
George W
Bush
Signed into
law July 30,
2002

7. What is & What for:
An Act To protect investors by improving the accuracy and
reliability of corporate disclosures made pursuant to the
securities laws, and for other purposes.
It created the PCAOB to over see the accounting industry.
It holds CEO personally responsible for the frauds in the
company.
It not only affects the financial side of corporations but also the
IT departments.

8. Breaking down of SOX
Section 302
Section 404
Section 802

9. Punishment
 Kenneth lay was sentenced on October 23,2006 but before three months
on July 6,2006 died of Heart-attack.
 Jeffrey skilling, CEO of Enron had punished with 24 years of imprisonment
 Andrew Fastow, CFO of Enron had punished with 6 years of imprisonment

10. THANK YOU