Enron Case
The Smartest Guys in the Room
It was a profound story happened between two giant companies, both of which once marked as one of the greatest companies for decades in the American History.
Enron, started as Northern natural Gas Company in 1930, creatively making its way through the Great Depression by opening up the natural gas market with its lower cost and developing extensive pipeline network with the unlimited low-cost labor resource, fell apart due to its creative use of the SPEs and related accounting treatment, and it never gets a chance to surprise the world again with their creativity in the second largest recession only a few years away.
Followed the sank of the energy titanic Enron, is the collapse of the most respected accounting firm Arthur Andersen, which has built a reputation of 100% honesty and integrity in the last century. They were known as “think straight, talk straight”, and if their clients wanted to do something they didn’t agree with, they’d either try to change the clients or quit. However, in auditing their big client Enron’s financials, they went off their reputation.
Many criticisms were focused on the accounting and financial reporting treatment of SPE-related transactions, in which, Arthur Anderson, as consultant to Enron at the same time, were believed to help cook the book. They not only lost the independence and objectivity in auditing Enron’s financials as an auditor, but also allowed some of the Enron officials to commit multiple counts of fraud for years under its cover.
To better understand the story, the following four topics were discussed. 1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List and discuss five parties and or factors that you believe were most responsible for the crisis of confidence. Justify your choices.
The Enron debacle was a far reaching scandal that implicated more than its employees and
It was a profound story happened between two giant companies, both of which once marked as one of the greatest companies for decades in the American History.
Enron, started as Northern natural Gas Company in 1930, creatively making its way through the Great Depression by opening up the natural gas market with its lower cost and developing extensive pipeline network with the unlimited low-cost labor resource, fell apart due to its creative use of the SPEs and related accounting treatment, and it never gets a chance to surprise the world again with their creativity in the second largest recession only a few years away.
Followed the sank of the energy titanic Enron, is the collapse of the most respected accounting firm Arthur Andersen, which has built a reputation of 100% honesty and integrity in the last century. They were known as “think straight, talk straight”, and if their clients wanted to do something they didn’t agree with, they’d either try to change the clients or quit. However, in auditing their big client Enron’s financials, they went off their reputation.
Many criticisms were focused on the accounting and financial reporting treatment of SPE-related transactions, in which, Arthur Anderson, as consultant to Enron at the same time, were believed to help cook the book. They not only lost the independence and objectivity in auditing Enron’s financials as an auditor, but also allowed some of the Enron officials to commit multiple counts of fraud for years under its cover.
To better understand the story, the following four topics were discussed. 1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List and discuss five parties and or factors that you believe were most responsible for the crisis of confidence. Justify your choices.
The Enron debacle was a far reaching scandal that implicated more than its employees and