The Financial Collapse Drama of Enron

The Financial Collapse Drama of Enron

Background Cash

Enron Corporation was an American energy company based in Houston, Texas, United States. Enron employed approximately 21,000 employees and is one of the world's leading companies in the field of electricity, natural gas, pulp and paper, and communications. Enron claimed to income in 2000 totaled $ 101 billion. Fortune named Enron "America's Most Innovative Company" for six consecutive years. Enron Corp. is a "skyscraper" in the American business world, just like the World Trade Center. Similar WTC tragedy, but minus the blood and death, Enron evaporate into dust when the company declared bankruptcy on December 2, the largest bankruptcy of in American business history of all time.

Enron still exist today and operates a handful of important assets and making preparations for the sale or spin - off the remains of his business. Enron emerged from bankruptcy in November 2004 after one of the biggest cases and most complex bankruptcy in U.S. history. Since then, Enron became a popular emblem of corporate fraud and corruption committed intentionally.

Enron scandal not only about the episode when  the  company  suddenly fall. But, also the mystery of how he became a giant sticking meteoric.  And this is a part of the more frightening because it involves political and economic aspects of the broader, not just the financial sector.  Law suits against the directors of Enron, after the scandal, is distinctive for its directors resolve the lawsuit by paying a huge sum of money personally.

Problem

Questions will be asked investigators to executives at Arthur Andersen, public accounting firms that check Enron's financial statements. How could they to missed over the years?

Theory

CPA Journal ?

CPAs attest to the reasonableness of disclosures, the freedom from material misstatement, and the adherence to the applicable generally accepted accountinprig nciples (GAAP) in financial statements.

-. LJM2 and the Raptors were not controlled by an independent party that possessed the substantial risks and rewards of ownership. Therefore, these entities were, in substance, part of Enron, and should have been consolidated into Enron’s own financial statements. Any gains or losses recorded by Enron, including the hedge transactions described above, should have been eliminated from Enron’s financial statements. The equity shares of Fastow and other partners should have been accounted for as minority interest holdings. Furthermore, Enron management should have provided greater detail about the related-party transactions with Fastow, including the specific amounts of transactions recorded, and the nature of any specific guarantees made to Fastow and other equity holders.

Conclusion

the existence of systematic rules both sides between public accounting firm for Enron to enrich the company with giving false reports

Name : Jusuf Hamanu Sukaton

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