Question

Hi, I have a question. The paper say, " The video "Bigger than Enron" 's states Enron's collapse was more than the story of just one company. What does this statement mean? How-far reaching are the implications of a corporate fraud of this magnitude? Please provide examples of inured parties and explain how they are affected."
?I understand the first question saying that Enron's scandal affect a lot of business. But I don't know understand the rest of the question. Would you please expain to me? Thank you for your help.

Answer 1

In early 2000s there were number of big accounting scandals that came to the fore front of the business world that shook the trusts of the investors in corporate accounting and accounting practices by the business organizations. Enron is one of such company that collapsed due to the failure of the management to correctly report its financial performance and position in the financial statements. Thus, Enron in retrospect is not a matter of a single company rather enlighten us about the huge crisis in accounting practices that were prevalent in companies all across the world during that period, i.e. specially in early 2000s. Enron in short enlighten us about the huge fundamental problem in the accounting regulations rather lack of it that allowed organizations such as Enron to continue fraudulent accounting practices at the cost of its stakeholders. Thus, the statement that Enron’s collapse was more than the story of just one company is absolutely correct.

Such corporate fraud has huge ramifications especially on the stakeholders and investors of companies. They lose confidence on the corporate accounting and management in general irrespective of the industry to which the organization is part of. Implications of corporate fraud such Enron’s shook the confidence of the investors and brought their confidence to the lowest level possible.

Example:

The investors of Enron lost millions of their investment simply due to the fraudulent accounting practice by the company to window dress the financial performance and position of the company despite not performing well in reality.