Enron Collapse Case Study

In the early 2000s, the business world was rocked by a series of scandals in the business sector and many of which involved suspicious accounting activities. One of the largest of these failures was a company known as Enron. Due to their involvement with Enron, the Enron debacle is sometimes referred to as the Enron/ Arthur Andersen scandal. The inclusion of Arthur Andersen in the Enron scandal was due in part to the fact that Andersen handled the accounting for Enron for approximately sixteen years. As a result, the government accused Andersen of overlooking large amounts of money which were not being accounted for in Enron’s books (HG, 2016). The Enron scandal was quickly recognized as one of the largest failures of its kind, in the business world, at the time of its occurrence. Enron, known mainly as an energy trader, was responsible for generating revenue in the range of approximately $111 billion in the year before its 2001 collapse. The collapse and eventual bankruptcy of Enron impacted individuals from the highest level executives, financial institutions, company employees, and even the average everyday working class people, whose …show more content…
In the case of Enron, there was the immediate layoff of approximately 4,000 employees. In addition to the large layoff was the disastrous loss in stakeholder income due to the rapid drop in the company’s stock price. With a stock price on the high end of more than $90 per share now falling to a near worthless level, every stakeholder was impacted tremendously. These horrendous failures, at the corporate level of Enron, created an environment in which stakeholders no longer trusted the corporate executives to make ethically correct decisions over their personal greed. Ultimately three top executives with Enron were found guilty of wrongdoing and awarded prison sentences and or substantial fines (Ferrell, Hirt, & Ferrell,