1 / 11

Enron Scandal: Case Study

Enron Scandal: Case Study. Prepared By: Pradeep Basnet. INTRODUCTION . Enron Corporation was an American energy, commodities, and services company based in  Houston, Texas.

hanzila
Télécharger la présentation

Enron Scandal: Case Study

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Enron Scandal: Case Study Prepared By: Pradeep Basnet

  2. INTRODUCTION • Enron Corporation was an American energy, commodities, and services company based in Houston,Texas. • It was one of the world's major electricity, natural gas, communications, and pulp and paper companies, with claimed revenues of nearly $101 billion during 2000. • Fortune named Enron "America's Most Innovative Company" for six consecutive years. • Deep debt and surfacing information about hiding losses gave the company big problems and in the late 2001 Enron declared bankruptcy under Chapter 11 of the United States Bankruptcy Code.

  3. WHAT MADE IT: SCANDAL In 1990’s corporate self regulation in US had been widely thought to have reached a high plateau of evolutionary success due to proliferating good practices and sophisticated institutional monitoring. However, bankruptcy of Enron shook the entire system. Some of the major highlights of scandal are: • $30M of self dealings by CFO • $700M of net earnings disappeared • $1.2B shareholder’s equity disappeared • Over $4B of hidden liabilities • Recorded assets were inflated, fraudulent and non-existent • Debt and losses were eliminated from financial statements.

  4. FALL OF ENRON • Enron's complex financial statements were confusing to shareholders and analysts • Complex business model(differentiation strategy) and unethical practices • Deregulation • Pension and auditing issues • Relationship with Banker’s • Mark to Market Accounting • Special Purpose Entities

  5. Causes of Enron Bankruptcy • Truthfulness The senior executives believed Enron had to be the best at everything it did and that they had to protect their reputations and their compensation as the most successful executives in the U.S. • Interest Conflicts of interest and a lack of independent oversight of management by Enron's board contributed to the firm's collapse.

  6. Enron and the reputation of Arthur Anderson • Accounting fraud Market to Market Special Purpose Entity • Key Players Andrew Fastow Kenneth Lay Jeff Skilling

  7. Sarbanes-Oxley Act-2002 • Came into force mainly due to financial scandals committed by cooperate giants like Enron, WorldCom, etc. • Created by U.S. senator Paul Sarbanes(D-Maryland) and US Congressman Michael Oxley((R-Ohio) • It was signed into law on 30th July, 2002

  8. Objectives of Sarbanes-Oxley Act 2002 In response to companies like Arthur Anderson, Enron, WorldCom scandal, the SOX Act seeks to: • Restore public confidence • Assure ethical business practices • Create Public Accounting Oversight Board(PACOB) • Set audit standards • Seek financial control

  9. Highlights of SOX ACT • Public Company Accounting Oversight Board • Auditor Independence • Corporate Responsibility • Enhanced Financial Disclosures • Analyze Conflicts of Interest • Commission Resources and Authority • Studies and Reports • Corporate and Criminal Fraud Accountability • White-Collar Crime Penalty Enhancements • Corporate Tax Returns

  10. Possible Lessons Learnt • Structural Overhaul of the system • Punish Corporate Responsibility • Workers participation and power in management decision • Struggle against trade agreements • Questioning Free Markets/Capitalism

  11. THANK YOU!!

More Related