This action might not be possible to undo. Are you sure you want to continue?
PowerPoint Slideshow about 'Enron Scandal: Case Study' - hanzila
Download NowAn 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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.
- 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.
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.
- Enron's complex financial statements were confusing to shareholders and analysts
- Complex business model(differentiation strategy) and unethical practices
- Pension and auditing issues
- Relationship with Banker’s
- Mark to Market Accounting
- Special Purpose Entities
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.
Conflicts of interest and a lack of independent oversight of management by Enron's board contributed to the firm's collapse.
- 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
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
- 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
- Structural Overhaul of the system
- Punish Corporate Responsibility
- Workers participation and power in management decision
- Struggle against trade agreements
- Questioning Free Markets/Capitalism