Essay about Enron Accounting Scandal

1700 Words Aug 7th, 2010 7 Pages
The Enron Accounting Scandal of 2001 There are many accounting scandals that have occurred throughout United States
History. Many scandals occur even without outsiders knowing anything that had occurred. Companies try their best to keep many of the accounting scandals quiet. Everyday, there are political and business fraud happening, and most of it goes unnoticed. No company wants to admit that there was a problem or that people within the company are not trust worthy. However, when executives in large corporations take scandal to the extreme, there is no way of keeping out of the spot light. Unfortunately, scandals are the tip of the iceberg. They represent visible failures and companies could really go down for such
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They would also use different banks which would issue these ghost company loans (Kay, 3). The end result was a complex set of financial statements which covered up the loans as cash flow, using their “independent SPEs” to gain Enron’s losses on paper and “create” profits. Another tactic that Enron used was by forecasting the futures market of energy sales (Kay, 2). The accounting frauds were discovered starting when Enron told investors they were restating earnings for the past 4 and ¾ years in November 2001 (Hale, 5). Declaring bankruptcy shortly after restating its earnings was also a clue. If that was not enough, the tip over was when Sherron Watkins, the vice president at the time, wrote a memo to chairman Kenneth Lay about the fraud that was occurring. .In August of 2001, Sherron Watkins, sent an email to Kenneth Lay, warning him that Enron would “implode in a wave of accounting scandals” (Watkins, 1). CEO Jeffrey Skilling suddenly resigned two months after the memo was sent to Lay. Enron, with the help of the Andersen Accounting firm, lost control of their illegal attempt to conceal the debt and losses of the company.
The governmental organizations involved in the Enron investigation are the SEC and IRS. The SEC investigated the fraud, issued fines, and filed criminal and civil charges against the companies involved and the Department of Justice (Enron Task
Force) prosecuted the accused firms (Flood, 2). Enron’s rights as a

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