Enron's Financial Scandal

Enron Corporation was an American energy, commodities, and service company based in Houston, Texas. It was founded in 1985 as a merger between Houston Natural Gas and InterNorth. Enron eventually became one of the world’s largest electric, gas, and communications company. In 2000, the company’s annual revenue reached $100 billion. Enron was ranked as the seventh-largest company. Shortly after, Enron’s stock price would drop from $90 in August 2000 to $0.26 in November 2001. Enron was caught committing accounting fraud, now known as the Enron Scandal. The beginning of Enron’s fraud began in 1992 when Jeff Skilling, the president of Enron’s trading operations, convinced Federal regulators to allow Enron to use the “mark to market” accounting

Arthur Andersen was an accounting firm founded by Arthur Andersen in 1918. The company eventually grew to be one of the Big 5 accounting firms. Arthur Andersen gained Enron as a client in 1986, where it provided external and internal auditing, as well as consulting services. “A chief auditor of Andersen Accounting named David Duncan, who was assigned to hand AA’s Enron account, turned a blind eye to all these accounting manipulations” (Cantoria, 2011). Arthur Andersen was aware of the use of SPV’s and even considered the transactions to be risky. However, “audit procedures did not reflect consideration of this risk” (Edelman & Nicholson, 2010). In 2001, the SEC was beginning to investigate Enron. David Duncan had ordered the auditors of Enron to shred any related documents. “The firm lost the majority of its clients and most of its talented employees” (Edelman & Nicholson). Arthur Andersen’s reputation was

Enron’s CEO, Ken Lay, retired in February giving the position to Jeff Skilling who then retired shortly after in the summer. Around the same time, Enron’s stock began to drop. “The stock descended to a 52-week low of $39.95. By Oct. 16, the company reported its first quarterly loss” (Segal, 2018). Enron would eventually catch the attention of the SEC after closing down one of its SPVs. Eventually, the SEC would announce that it would be “investigating Enron and the SPVs created by Fastow” (Segal, 2018). On Dec 2, 2001, Enron filed for Bankruptcy. The company has been liquidating its operations and assets of the “pre-bankruptcy” Enron to pay back