Fall Of Enron Essay

Prior to 2000, Enron was an American energy, commodities and service international company. Enron claimed that revenue is more than 102 millions (Healy & Palepu 2003, p.6). Fortune named Enron “American most innovative company” for six consecutive years (Ehrenberg 2011, paragraph 3). That is the reason why Enron became an admired company before 2000. Unfortunately, most of the net income for the years 1997-2000 is overstated because of unethical accounting errors (Benston & Hartgraves 2002, p. 105). In the next paragraph, three main accounting issues will identify for what led to the fall of Enron.
The first issue that makes the fall of Enron was special-purpose entities problem. Between 2008, the mark-to-market practice led to schemes that

Some economist argues that conflict of interest arises (Healy & Palepu 2003, p. 15). Although Arthur Andersen spokesman argues that “It’s not an issue that is addressed in one of our standard agreements with a client” (Herrick & Barrionuevo 2002, para 6), it is quiet unusual that consulting fees that Arthur Andersen earned is higher than audit fees ($27 million in consulting fees and $25 million in audit fees). It is understood that this problems cannot be determine whether financial incentives is arose or not. However, $25 millions of audit fees must have a vital impact on negotiations with Enron’ management. Therefore, Arthur Andersen is liable on providing poor accounting information. Arthur Andersen failed to exercise their professional accounting judgment in reviewing Enron’s accounting transaction that was clearly designed for financial purpose rather than business purposes. When the credit risks requires Enron take a write-down, auditor’s permitted to defer recognizing the charges (Healy & Palepu 2003, p. 15). Pervious example makes Anderson cannot provide any excuses for their poor Enron’s external auditing, which also make Enron’s prevent its demise.
From the Enron case, there are lots of breaches of accounting and ethical conduct occurred. For example, it breaches “The Securities Act 1933” to make

Leaders not only fostered a wrong sense of security for employees, paying high wages to keep workers dependent on the system via golden handcuffs, but also may allows employees did unethical behaviors. This repressive and illegal corporate would eventually make company lost creditability, or else, make company collapse. iii. Accountants needs to maintain reliable professional judgment
At Enron case, none of any executives or high level of managers report the actual problem arise in company. No matter employees or manager, they tend to be quiet or continuous hide the information from the company. Illegal activities always eventually shown and people who are involved would liable for those illegal activities. For example, Jeffrey Skilling is sued for conspiracy, securities fraud, false statement and insider trading in high court, and eventually was sentenced to 24 years and 4 months in prison. iv. Executives