Enron And The Collapse Of Enron Essay

Enron And The Collapse Of Enron Essay

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On May 25th, 2006 Chief Executives, Kenneth L. Lay and Jeffery K. Skilling were both found guilty of fraud and conspiracy. “The conspiracy and fraud convictions would each carry a sentence of 5 to 10 years, as well as Mr. Skilling inside trading charge which carries a maximum of 10 years (Barrionuevo, 2014). Lay and Skilling hold the majority of blame, because they made their management decision to encourage Greed and Fraud regardless of ethics. These men were very short sited with their approach and were not qualified to hold their post. The fallout from Enron has changed the way business is conducted to this day under relevantly new Sarbanes and Oxley Act. Even though Sarbanes And Oxley Act was passed, there are still more precautions that need to be taken. Enron mistakes resulted in new laws being passed, but there were many problems internally that Enron did to lead to its failure.

Accounting played a big role in the collapse of Enron. With controversial accounting practices being used, Enron perceived there finances being much bigger then what they actually were. One of the major accounting practices was decentralizing operations and putting them into shell corporation, this allowed Enron to hide huge loses. Another accounting practice that led to the Enron collapse was Enron accountants and managers were holding off losses and putting them into shell companies then only stating assets. “The Enron Corp. used undisclosed reserves to keep as much as $1.5 billion in trading profits off its books during the California energy crisis, according to six former managers and executives who handled or reviewed the accounts (Barboza, 2002). ” Accounting played a huge role in the collapse of Enron as well as the financial backlash that f...


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...nd if there is unethical officers leading the company, then the whole company is doomed to fail. It’s sad to see that a few people have caused such a stain on the idea of American Capitalism.






Bibliography

BARRIONUEVO, A. (2006, May 25). Enron Chiefs Guilty of Fraud and Conspiracy. Retrieved October 13, 2014, from http://www.nytimes.com/2006/05/25/business/25cnd-enron.html?pagewanted=all&module=Search&mabReward=relbias:w

Barboza, D. (2002, June 23). THE ENRON COLLAPSE / Questionable Accounting Practices / Huge profits from California hidden away / Feds investigating reserves totaling as much as $1.5 billion. Retrieved October 13, 2014, from http://www.sfgate.com/news/article/THE-ENRON-COLLAPSE-Questionable-Accounting-2805132.php

Follow The Enron Money. (2002, January 12). Retrieved October 13, 2014, from http://www.cbsnews.com/news/follow-the-enron-money/


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