The Enron scandal involved accounting fraud at the now-bankrupt Enron Corporation. Enron disguised losses as profits by using accounting loopholes and complex financial reporting. This allowed Enron executives to profit while hiding the company's true financial situation. When Enron collapsed in 2001, it was one of the biggest corporate bankruptcies in U.S. history and drew attention to flaws in accounting oversight and corporate governance.

1. Enron Scandal
CILM Book Review
0834172
IB3A20 Critical Issues in Law and Management
Book Review
Enron, Titanic and The Perfect Storm – Nancy B. Rapoport
Student No: 0834172 Word Count: 1500
1
CILM Book Review
0834172
Two years after Enron filed for bankruptcy in 2001, Nancy b. Rapoport wrote this essay expressing
her unique perspective on the real cause of Enron's demise. This essay catches the reader's attention
instantly, because unlike abundant other articles written on the biggest corporate scandal in
American history, the author here rejects Jeff Skilling's (former president of Enron) argument1 of
what brought about Enron's downfall. She instead uses another metaphor, arguing that Enron's
downfall was more like Titanic's–...show more content...
I would go a step further to say that it seems like the author has taken the metaphors a bit too
seriously and would agree with Mark's comment in 'Lawyers in the Perfect Storm3' that ''her
insistence on comparison of the Enron scandal to the tragicomedy of human errors in the sinking of
the Titanic underestimates the importance of the systemic failures that allowed the malign
leadership of Enron to produce such an enormous disaster.'' Nevertheless, she develops her further
argument well as she explores the inextricable link between Character and Leadership. She
elaborates on the inevitable failure of character in Enron leaders to resist illegal deals when the
supervisors of those leaders were also engaging in side deals (pg 209). Her close attention to the
underlying conflict of human traits and situations, aggravated by the magnitude of profits offered by
the Enron culture justifies her statement, 'why it must have taken significant strength of character to
resist getting on that gravy train' (pg 210).
3
Sergeant, M, .2003. Lawyers in the Perfect Storm, Washburn Law Journal,. pg 3
4

2. CILM Book Review
0834172
Moreover, the author does not merely conclude her argument, rather deals well with counter
evidence as she considers the few people that did resist and play the role of whistle blowers. Her
point that 'most whistle blowers at Enron were suppressed with downright abuse
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3. Scandal Of Enron Scandal
Enron was a Houston Based natural gas Pipeline Company formed by merger in 1985.The
corporation Enron was effectively involved in energy broker, electronic energy training, global
commodity and options trading. Enron was long viewed as star of the stock market. Enron was
America's seventh largest corporation. Enron was steady company with good revenue, a large part of
Enron case was made up of paper.
Enron employed approximately 20,000 staffed workers in an organization and was one of the major
electrical, natural gas, communicators and pulp and paper companies, with claimed revenues of
$111billion during 2000.
From 1990's until fall 2001 Enron was known as one of the best America's energy, commodities and
services company. Enron was the largest...show more content...
Special purpose was created to mark more of the significant liabilities from Enron's financial
statements. These transactions seem more profitable than it actually was a danger. The corporate
officers were creating more and more money of billions and dollars in profit while the company was
actually losing money. The executives and insiders at Enron knew about the increased the accounts
that were hidden loss for the company but the investors knew nothing of it.
The fate of Enron shook the entire US economy and its global perception of a well monitored and
ethical economy. The scandal made the authorities realize the importance of internal control in
business enterprises. It also helped understand the real meaning of share holder's wealth
maximization and the boundaries within which this key objective is to be achieved.
Initially, skilling and other CEO's responded to questions by insulting reporters and lying to
employees when pressure mounted executives sold his Enron shares at massive profit and resigned
the company declared bankruptcy its formerly golden stock now worthless because of its silent
complicity in the Enron scandal the company was also offered to close its
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4. Enron Scandal Essay
The reason of Enron Corporation downfall for audit failure is conflict of interest and accounting
fraud. This is because 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. Some have suggested
that Enron's compensation policies engendered a short–sighted focus on earnings growth and stock
price. In addition, recent regulatory changes have focused on enhancing the accounting and
strengthening internal accounting and control systems. In these issues, it begin with Enron's board.
The conflict of interest between the two roles played by Arthur Andersen, as an auditor, he also as a
consultant to Enron Corporation. While investigations continue, Enron Corporation has sought to
salvage its business by spinning off various assets. As that, Arthur Andersen actually has admitted
some...show more content...
It also help to understand the real meaning of Shareholder Wealth Maximization. Enron Corporation
scandal also help to conceal the true of financial statement and ensure that investor fund. When the
time of Enron's collapse, it was the biggest corporate bankruptcy ever to hit the financial world. But
then WorldCom, Lehman Brothers and Washington Mutual have surpassed Enron as the largest
corporate bankruptcies. The Enron scandal drew attention to accounting and corporate fraud, as its
shareholders lost $74 billion in the four years leading up to its bankruptcy, and its employees lost
billions in pension benefits. The Sarbanes–Oxley Act has been called a "mirror image of Enron, the
company's perceived corporate governance failings are matched virtually point for point in the
principal provisions of the Act." Increased regulation and oversight have been enacted to help
prevent or eliminate corporate scandals of Enron's
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5. Enron Scandal
THE ENRON SCANDAL
FACTS OF THE CASE
Enron Corporation was an American energy, commodities, and services company based in Houston,
Texas. Enron 's predecessor was the Northern Natural Gas Company, which was formed during
1932, in Omaha, Nebraska. It was reorganized during 1979 as the main subsidiary of a holding
company, Inter–North which was a diversified energy and energy related products company. During
1985, it bought the smaller and less diversified Houston Natural Gas company.
> Employed approximately 20,000 staff
> One of the world 's major electricity, natural gas, communications, and pulp and paper companies.
> Revenues of nearly $40.1 billion.
Enron was almost universally considered one of the country 's most innovative...show more content...
PROBLEMS OF THE CASE
1. The need for significant reforms in accounting and corporate governance in the United States, as
well as for a close look at the ethical quality of the culture of business generally and of business
corporations in the United States.
2. A private company like Enron currently hires and pays its own auditors. This again is a conflict of
interest built into our legal system because the auditor has an incentive not to issue an unfavorable
report on the company that is paying him or her.
ALTERNATIVE COURSES OF ACTIONS
1. Current laws and SEC regulations must not allow firms like Arthur Andersen to provide consulting
services to a company and then turn around and provide the audited report about the financial results
of these consulting activities.
2. And if the first ACA is not applicable, the company should have better financial disclosure
mechanisms. Expense claims should be processed properly with an allocated time to properly check
the finances and expenses. This is to correctly audit and make a balance sheet to show where the
money was used and to check the profits of the company. And not for the staff to make poor
performances. And also separate auditing from consulting functions.
THE BEST ALTERNATIVE COURSES OF ACTION
The best solution for this Scandal was the ACA 2. The company should have better financial
disclosure mechanisms. Expense claims should be processed properly with an allocated time to
properly
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6. Essay On Enron Scandal
The reason of Enron Corporation downfall for audit failure is conflict of interest and accounting
fraud. This is because 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. Some have suggested
that Enron's compensation policies engendered a short–sighted focus on earnings growth and stock
price. In addition, recent regulatory changes have focused on enhancing the accounting and
strengthening internal accounting and control systems. In these issues, it begin with Enron's board.
The conflict of interest between the two roles played by Arthur Andersen, as an auditor, he also as a
consultant to Enron Corporation. While investigations continue, Enron Corporation has sought to
salvage its business by spinning off various assets. As that, Arthur Andersen actually has admitted
some...show more content...
It also help to understand the real meaning of Shareholder Wealth Maximization. Enron Corporation
scandal also help to conceal the true of financial statement and ensure that investor fund. When the
time of Enron's collapse, it was the biggest corporate bankruptcy ever to hit the financial world. But
then WorldCom, Lehman Brothers and Washington Mutual have surpassed Enron as the largest
corporate bankruptcies. The Enron scandal drew attention to accounting and corporate fraud, as its
shareholders lost $74 billion in the four years leading up to its bankruptcy, and its employees lost
billions in pension benefits. The Sarbanes–Oxley Act has been called a "mirror image of Enron, the
company's perceived corporate governance failings are matched virtually point for point in the
principal provisions of the Act." Increased regulation and oversight have been enacted to help
prevent or eliminate corporate scandals of Enron's
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7. The Enron Scandal Essay
The Enron Scandal
Enron was established in 1930 as Northern Natural Gas Company and joined with three other
companies to undertake this industry. The four companies eventually began to break apart between
1941 and 1947 as a result of a public stock offering. In 1979, Northern Natural Gas was placed under
new management when it was bought by InterNorth Inc. In 1985, Kenneth Lay, CEO of Houston
Natural Gas Company devised a transaction for InterNorth to purchase Houston Natural Gas. Lay
was named CEO of the new company and changed InterNorth's name to Enron Corporation. This
newly developed company originally was involved in distributing gas and electricity throughout the
United States, and operation of power plants and pipelines...show more content...
During this time Kenneth Lay was cashing in his own Enron stock, which sold for thirty seven
million dollars (Thomas, 3).
The GOP also indirectly helped Enron conceal its illegal activities. The company placed more than
one–third of its subsidiaries in offshore accounts and slipped its domestic assets in different tax
shelters, which helped conceal Enron?s financial situation. The main reason that Enron escaped any
detection of fraud is that it invested in a particular type of derivatives. This was a complex financial
arrangement that escaped all regulatory provisions. There was no law that required the company to
disclose its derivative investments on their balance sheets (Calkins, 1).
The government was also lured in by Enron?s executives. The company profited from a relaxed
regulatory system that it helped dictate. Lay and other top Enron executives met on several
occasions with Vice President Dick Cheney, who was heading President Bush?s energy task force.
The company was also involved in making deals with other politicians. Economic counselor
Lawrence Lindsey had been a paid adviser. Political strategist Karl Rove had been a big investor.
Republican national chairman Mark Raicicot had been a paid lobbyist. Over two–thirds of the
Senate and nearly forty percent of the House of
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8. Enron Research Paper
The Enron Scandal One of the most popular business bankruptcies and collapses known to date is
that of the Enron Corporation. Enron, once known as "America's Most Innovative Company" by
Fortune Magazine six straight years from 1996 to 2001. Enron seemed to be doing very well until
the summer of 2001 generating a lot of cash and new businesses, but in October of 2001 Enron was
forced to disclose that their accounting practices had been very creative, and failed to follow
generally accepted accounting principles. Profits that had been soaring sky high were wiped away
and replaced with enormous losses and charges that were never recorded properly. Unfortunately,
Enron executives who were responsible for the shady accounting practices,...show more content...
Without these government oversights Enron could do as they pleased and is the reason why they
became a 100–billion dollar business (Lindstrom, 2004). Enron began business in 1986 as a small
pipeline company out of Houston. At that time Enron's goal was to create the first national gas
pipeline. Unfortunately for Enron, the gas industry was regulated by the government, meaning they
were told how much to charge for power, and profits were set a maximum. Through American–style
bribery, also known as political donations, Enron was able to deregulate the gas market
(Anonymous, 2004). With the help of Chief Executive Officer, Kenneth Lay, Enron was able to
successfully enter into the energy market. Again, through political donations by Enron to political
legislation they were able to deregulate the energy market, bringing together buyers and sellers of
energy, and dominate trade contracts made possible through the use of financial instruments called
derivatives (Lindstrom, 2004). "A derivative is an instrument whose value is "derived" from the
underlying value of something else, such as a stock, a bond, or in the case of Enron's derivatives, a
unit of electricity. Derivatives are useful because they enable an investor to hedge against a decline
in value. For example, Enron could enter a contract with a purchaser of electricity, such as a utility,
guaranteeing that the purchaser would pay a certain price for a certain amount of
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