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Enron Scandal

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Enron Scandal
Abstract - The Enron scandal is one of the biggest financial scams ever to take place and its root’s lie in the desire of the senior members of Enron to earn as much for themselves as possible and were assisted in this greatly by the negligence shown by their auditor’s and consultants, Arthur Andersen. Most of the debts and tangible assets of Enron were on the balance sheet of partnerships that were run by high-ranking officials within the corporation and these partnerships were recorded as related parties, but were never consolidated so that the debt never showed up on Enron’s financial statements, as it would have if statements were prepared according to GAAP. Arthur Andersen chose to turn a blind eye to these discrepancies by certifying their financial statements as true & fair, and therefore failing miserably in their duty as an auditor which ultimately led to their decline. This scandal made way for many changes including the Sarbanes-Oxley Act which requires companies to re-evaluate its internal audit procedures and make sure that everything is running up to or exceeding the expectations of the auditors.

Introduction –
Arthur Andersen and Enron - two names that will forever live in infamy because of the events leading up to and including the debacle of December 2001, when Enron filed for bankruptcy. These two giants in the utility and accounting industries, and known throughout the world, took advantage of not only investors, but also the government and public as a whole, just so that those individuals involved could illegally increase their personal wealth. How could the backlash from the actions of the management of these two organizations have a positive influence in the accounting industry as a whole? The fallout from Enron’s bankruptcy and the SEC investigation that followed resulted in many changes to the industry to make standards tougher, penalties harder, and the accounting industry more reliable. At first glance, these “improvements” just


Bibliography: – a.) CBC News - http://www.cbc.ca/news/business/story/2006/05/25/enron-bkgd.html b.) The Economist - http://www.economist.com/node/940091 c.) TIME Magazine - http://www.time.com/time/business/article/0,8599,263006,00.html http://www.time.com/time/magazine/article/0,9171,1001636,00.html d.) Wikipedia - http://en.wikipedia.org/wiki/Enron_scandal
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