Enron Case Study: Identifying Causes of Collapse and Implications for Stakeholders

This presentation delves into the Enron scandal, discussing the accounting problems, management culture, and shady operations that led to the company's collapse. It also explores the immediate implications for Enron and its stakeholders, as well as the wider implications for the corporate world, auditing profession, and corporate governance. Finally, the presentation hypothesizes auditing activities that could have reduced the likelihood of the collapse.

C A S E S T U D Y O F E N R O N
Auditing

Identifying the underlying causes of the collapse
The cause of Collapse
 Accounting problems
 Management culture
 Preferential treatment
 Shady management operations
The major Players in the scandal
 Arthur Andersen LLP
 David B. Duncan

Discussing the immediate implications for the entity and
other stakeholders
Implication of Enron
 Loss of trust from investors
 SEC investigation
 Downgrade of credit rating
 Bankruptcy
Implication of Stakeholders
 Massive decline in share price
 Loss of creditors
 Blocking of payments

Discussing the implications
Corporate world
 Introduction of Sarbanes-Oxley Act
 Massive volatility in capital market
 Reduction in trust of investors
Auditing profession
 Reduction in trust of auditors
 Criticising of Enron audit partners
Corporate governance
 Incorporation of corporate governance in
organizations
 Reduction in shady businesses

Hypothesise the auditing activity that might have reduced
the likelihood of the collapse
The auditing activities could have used by
auditors are
 Evaluating the mark to market transactions
 Estimating the special purpose entities transactions
 Analyzing the Management compensation
 Using Regulatory audit procedures
 Detecting assets and debt levels

Bibliography
Kumar, H. and Aldous, D., 2015. Exploratory
Data Analysis of Enron Emails. University of
California-Berkeley.
Markham, J.W., 2015. A financial history of
the United States: From Enron-era scandals
to the subprime crisis (2004-2006); From the
subprime crisis to the Great Recession (2006-
2009). Routledge.

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