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Enron Scandal

Enron was once a growing corporation whose stock prices increased dramatically as investors poured money in. However, unknown to investors, Enron was falsifying its financial statements using mark-to-market accounting and recording future contract revenues immediately to inflate numbers. When a journalist exposed accounting issues and the CEO resigned, the SEC investigated and uncovered widespread fraudulent activities, as the independent auditors had failed to properly do their job and catch the issues.

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Jaylord Reyes
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151 views1 page

Enron Scandal

Enron was once a growing corporation whose stock prices increased dramatically as investors poured money in. However, unknown to investors, Enron was falsifying its financial statements using mark-to-market accounting and recording future contract revenues immediately to inflate numbers. When a journalist exposed accounting issues and the CEO resigned, the SEC investigated and uncovered widespread fraudulent activities, as the independent auditors had failed to properly do their job and catch the issues.

Uploaded by

Jaylord Reyes
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ENRON SCANDAL

Enron was once one of the biggest growing corporations in the world with its
stock prices increasing in value. Investors were so charmed by Enron that they start
investing huge amounts of money on the stock market, this will later result into a
financial nightmare. Unknown to the investors, Enron was falsifying their financial
statements. They do this by using the Mark-Market Accounting which was approved by
SEC. Enron saw an opportunity to increase their revenue and ultimately scamming
investors. Contract revenues in Enron are recorded by the time it was created, for
example if Enron entered into a contract agreement that will gain revenue of 20,000,000
after 10 years, they will record the revenue today, increasing their revenue making it a
very attractive investment opportunity. Furthermore Arthur Andersen, the independent
auditors of Enron was receiving money from the company to certify falsified financial
statements, which made the whole ordeal seemingly secretive. Bethany Mclean was
one of the first to expose Enron’s wrongdoings, as a journalist she interviewed the
corporation’s CFO and later on publishing the article “Is Enron Overpriced”. Later on,
Enron CEO resigned furthering the speculations which resulted to the SEC forming an
informal investigation against the corporation. During the investigation fraudulent
activities done by the company surfaced. According to experts, this massive fraud would
have been stopped if only the auditors did their job. They would have detected the
wrongdoings and immediately put a hold on the possible number of victims. As an
internal auditor it is important to be vigilant and professional, they should be firm and
strict on their beliefs which include working with honesty and dignity among others.

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