Enron Scandal Summary

808 Words 4 Pages
Ian D Johnson
Jb Henriksen
Accounting 2600

Case Presentation: Enron Scandal
Before the scandal that Enron is widely known for today, they were an up and coming American energy company led by CEO Kenneth Lay. In 1985, Lay helped to merge two natural gas companies known as Houston Natural gas and InterNorth to form Enron. Soon after, Congress approved legislation that deregulated the sale of natural gas, allowing companies to use the free market to sell energy. The company became a national middle man for the electricity for the newly deregulated states. This allowed Enron to sell energy at higher prices, increasing its revenue. By 1992, Enron became the largest seller of natural gas in North America.
From 1994 to 1999 Enron had been named fortune 500’s most innovative company every year. At the time,
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Senator Paul Sarbanes and Representative Michael Oxley drafted the Sarbanes – Oxley act or SOX. The goal of the act was to protect investors by improving the reliability and the accuracy of what was being reported by companies by: “1. Closing loopholes in recent accounting practices 2. strengthening corporate governance rules 3. increasing accountability and disclosure requirements of corporations, especially corporate execs, and corporation’s public accountants 4. Increasing requirements for corporate transparency in reporting to shareholders and descriptions of financial transactions 5. Strengthening whistle – blower protections and compliance monitoring 6. Increasing penalties for corporate and executive malfeasance 7. Authorizes the creation of the Public Company Accounting Oversight board to further monitor corporate behavior, especially in the area of accounting” (Peavler) The act has been credited with reducing corporate fraud and allowing for more accurate investor projections since it was put into

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