Enron Scandal: Causes, Parties Responsible, and Damages Imposed

AUDIT, ASSURANCE AND
COMPLAINCE

Overview
 Enron Corporation which was company based in Houston have
their services in commodities, services and American energy. Enron
was founded in year 1985 by the merger of Inter North as well as
Houston natural gas that was two regional small companies
 Enron Corporation has gained the success very fast and it has
faced downfall with the same speed of the success. The downfall of
the company has affected thousands of people and the employees
of the company.
 The share was at the worth of $90.75 at the peak of the Enron, but
it was at $0.26 at the time when it was declared bankrupt.
 This has created the buzz around the world that how one of the
world’s largest company was disintegrated almost over the night.

Issues Behind the Case
 Enron has started for crumbling under their own weight. Financial
losses of company’s operations and business trading were
intentionally hidden by the company’s CEO Jeffrey Skilling with
the accounting method of mark-to-market.
 In case of Enron, the company builds the asset, for example
power plant and even though they have only made small amount
of money, they immediately claimed for the projected profit on
their books.
 If in the case the company has suffered losses from power plant
than what it was actually projected, then it that case company
transferred the assets to corporation of off the books in which
losses was not reported.

Continued...
 The company intentionally engaged in writing off the unprofitable
business activities without doing the bottom line changes.
 The practice of mark-to-market has led to scheme, which was
specifically designed for making the company for appearing more
profitable that in actual reality it was.
 The company’s CFO, Andrew Fastow has deliberately made plan
for doing the fraudulent activities.
 This plan was made for showing the company was in the sound
financial positions, despite of the fact that the subsidiaries of the
company were losing the money