Question

Questions about Enron Scandal I cant seem to find answers for:

1. What was the name of the questionable accounting practice promoted by Skilling and how did it work? How did Andy Fastow hide losses through accounting practices?

2. What happened in California and how could it have been prevented?

3. What was the role of the Wall Street financial analysts in the Enron fraud and what question did Bethany McLean ask of Enron that the financial analysts did not ask? Why didn’t they ask this question?

4.Who was the auditing firm for Enron and what happened to this firm? What has been done since Enron to improve accounting reporting and ethics? You will need to research this last question in your textbook and on the Internet.

5. What were your impressions of the Enron story? Is it just a story about numbers and accounting or is it something more? Could this happen again? What was the suggestion at the end of the movie for preventing this kind of tragedy in the future? Other ideas?

Answer 1

Answer

1.  energy Trader Enron Corp. found itself at the center of one of corporate America’s biggest scandals. In less than a year, Enron had gone from being considered one of the most innovative companies of the late 20th century to being deemed a byword for corruption and mismanagement.

2.  Enron was formed in July 1985 when Texas-based Houston Natural Gas merged with Inter North, a Nebraska-based natural gas company. In its first few years, the new company was simply a natural gas provider, but by 1989 it had begun trading natural gas commodities, and in 1994 it began trading electricity.

3.  Enron, which a year before had been touted as the seventh largest company in the U.S., filed for Chapter 11 bankruptcy protection and sued Dynegy for wrongful termination of the failed acquisition. A month later Lay resigned, and the White House announced that the Department of Justice had begun a criminal investigation of Enron.

4. As rumours about Enron’s troubles abounded, the firm shocked investors on October 16 when it announced that it was going to post a $638 million loss for the third quarter and take a $1.2 billion reduction in shareholder equity owing in part to Fastow’s partnerships. At the same time, some officials at Arthur Andersen LLP ,  Enron’s accountant, began shredding documents related to Enron audits.

5.  the once-mighty company was in tatters. Enron’s energy-trading business had been sold off to the European bank UBS Warburg in January. Throughout the spring top Enron officials were subpoenaed to testify before congressional hearings. The majority of Enron’s employees were unemployed, and their stock plans had become almost worthless. In June Arthur Anderson was convicted in federal court of obstruction of justice, while many other American companies scrambled to reexamine or explain their own accounting practices. As investigations continued into Enron’s financial dealings, government connections, and possible involvement in California’s energy problems, it appeared likely that the political and economic fallout would be making headlines for some time.