Enron Scandal: Role of Auditors and Consequences

Auditing Theory and
Practice
8/4/2019
Enron Scandal

Audit 1
Contents
Introduction......................................................................................................................................2
Organisation, time, and place..........................................................................................................3
Overview of Enron Scandal.............................................................................................................3
Example of fraud.............................................................................................................................4
Stakeholders and their consequences...............................................................................................5
Auditors and their role in Enron scandal.........................................................................................6
Present condition of responsible person for fraud...........................................................................6
Conclusion.......................................................................................................................................8
References........................................................................................................................................9

Audit 2
Introduction
The aim of the report is to conduct the research on one of the major scandal that involves the
auditors in some way. The selected scandal for this the report is Enron scandal that lead to
bankruptcy of Eron company which was an American energy business founded in Houston,
Texas. This report provides understanding of the major points of affairs along with role of
accountants in entire scandal that took place that involved the discussion of event, Stakeholders,
and its assigned consequence and many others.

Audit 3
Organisation, time, and place
Enron Corporation was one of the well-known American energy business that is founded in
Houston, Texas and came into existence in the year 1985 next fusion of two small regional
energy businesses in order to the enhance the profitability. After the merger, Kenneth lay, had
been the Houston Natural Gas became Enron CEO as well as chairperson (Smith, 2018). Then
the company was rebranded into the suppliers as well as the energy trader. It has been found that
deregulation of energy market permitted the businesses to place bets on upcoming charges as
Eron was composed to avail benefit in market. The boon in the market offered many
opportunities to Eron during 1990s. The growing needs of the market made the company to form
the contract for diverse variety of commodities that include cool, paper, steel, weather and many
others. Eron deals with the rise in competition in energy trading business and profit of the
company was shanking rapidly which leads to the numerous changes in accounting practices due
to stakeholders that ultimately led rise to scandal that involves auditor.
Overview of Enron Scandal
The impact of competition that affected profit made the company to select new accounting
practices in market. Enron selected MTM accounting that is mark to market accounting practice.
The implementation of accounting practice was done after the approval from the authorized US
Securities and Exchange Commission (SEC) agreement in the year 1992 (Corporate Finance
Institute, 2019). This method of accounting allowed Enron Company to worth their monetary
condition according to the reasonable worth of assets of business that might change with the
change in market conditions (Boddy, 2017). The auditors of Enron used this technique of