Enron Financial Fraud Case Analysis

Financial and Management
Accounting project 1 Part 1
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Table of Contents
Introduction......................................................................................................................................3
MAIN BODY..................................................................................................................................3
Conclusion.......................................................................................................................................5
REFERENCES................................................................................................................................6
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Introduction
In this report a financial fraud case of the Enron a company of United States is been
analysed and highlighted. A description is been provided how the company is involved in the
fraudulent practices which lead the company to Bankrupt.
MAIN BODY
The Enron a company which had its businesses diversified into various sectors took 16 years
to multiply its $10 billion to $65 billion, and in just 24 hours the company had gone bankrupt.
The company collapsed very fast within a week and the reason behind was greed and arrogance.
The company has a pool of gasoline as an assets. The case was seen as a result of complex
transactions mismanagement but in reality it was human greed that took over. Enron is the 7th
largest business corporation of the United States and the company is seen as a biggest contributor
in the presidential campaigns in the country (Alali and et.al, 2017). The investigators of the
Enron case out the act of fraud committed by the employees by selling off billions of dollars’
worth stocks in few months in a proceeds. 20,000 employees of Enron had lost their jobs and 2
billion dollars’ worth pensions and retirements funds have disappeared. Enron had made capital
expenditure in the oil fields in Texas and obtain rights over the distribution of the natural gas. In
1990, the U.S. government had deregulated the sale of natural gas which create an impact over
the company and it lost its rights over distribution of gas through pipeline. The top management
of Enron Jeffrey Skilling saw it as an opportunity to recreate the business of Enron from the
bottom by transform the company into energy trading company. The condition was set that
Mark-to-market accounting treatment was used. This method is used to adjust value the assets in
a manner that it reflect the value of the assets as per the current market price (Burke and et.al,
2017). The accounting help Enron to book potential future profits but in reality the company did
not gained actual profits. It had been said that money is the only motivator in the Enron. The top
management answer to the performance review committee which had terminated 15%. One of
the top management had who had the access and connection to the energy markets had resign
and took $250 million as compensation. The company was disposing huge amount of funds in
the capital market and started manipulating the market. Enron had made a campaign to gain the
attraction of the stock analyst and they begin to talk about the company which in turn push the
price of the energy derivative stocks. The top management of Enron begin to manipulate the
price increase by the use of pump and dump strategy top executives push the stock price up and
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