Accounting Theory | Case Study Report

Running head: ACCOUNTING THEORY
Accounting theory
Name of the Student
Name of the University
Author Note

ACCOUNTING THEORY
Abstract:
The paper is developed to conduct an investigation into the case of Enron by identification of
different accounting theories. The facts of the case of the collapse of Enron has been
ascertained and the fraud and conspiracy guilt on part of chief of Enron has been discussed.
Stakeholder theory has been used to identify the relevant stakeholders impacted by the
collapse of the company. In the next section, second accounting theory such as positive
accounting theory has been applied to the case of Enron for determining the impact of
downfall on different stakeholders. The later section of paper outlines the comparison
between different accounting theories along with the identification of the relevant theory
from the cost savings perspectives of Enron.

ACCOUNTING THEORY
Table of Contents
Abstract:.....................................................................................................................................1
Introduction:...............................................................................................................................3
Discussion:.................................................................................................................................3
Determining the facts of case:....................................................................................................3
Discussing the reason Enron faced the guilt of fraud and conspiracy:......................................3
Identification of stakeholder affected by the collapse using stakeholder theory:......................4
Application of accounting theory to Enron case:.......................................................................4
Comparing and contrasting different accounting theories and identification of most
appropriate theory from the perspective of Enron:....................................................................6
Conclusion:................................................................................................................................8
References list:...........................................................................................................................9

ACCOUNTING THEORY
Introduction:
In the year of 2001, the bankruptcy of the American energy based company named
the Enron corporation was publicized which is well known as the Enron scandal. It was
perhaps the largest of the bankruptcy reorganization in the entire history of America during
that time period. Enron was considered to be the biggest audit failure. Enron was formed by
merging Houston natural gas and Inter north in the year of 1985. However after Jaffery
Skilling was hired, several new strategies were adopted by him in order to confide the billions
of dollars in debt as a result of the failed projects and deals additionally Andrew Fastow
misled the team of executives and also neglected the risks associated with the unfair
accounting practices (Haswell and Evans 2018).
Discussion:
Determining the facts of case:
Enron collapse is the largest bankruptcy case in the history of world due to the
adoption of scheme of massive fraud. The accounting method adopted misled investors by
overinflating the estimated profits of the company (Nytimes.com 2020).
Discussing the reason Enron faced the guilt of fraud and conspiracy:
The chief executives tried to hide their deeds by saying that there are no frauds at
Enron other than the one’s committed by a few underlings who took theft millions of
confidential side deals. Enron had been summoned by the court for cheating with the
shareholders Enron’s gravity defying stock price had created a wall street darling and made
an icon of the new economy in the era of the 1990’s, however the revelation of the billions of