the enron scandal
DESCRIPTION
THE ENRON SCANDAL. Jing Li Chrissie Parsons Holy Moye Charles Rollins. BACKGROUND. Texas-based pipeline company formed in 1985. One of America’s largest energy companies From 1996 and 2000 , revenues increased by more than 750%. Scandal revealed in 2001. - PowerPoint PPT PresentationTRANSCRIPT
![Page 1: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/1.jpg)
THE ENRON SCANDALJing Li
Chrissie Parsons
Holy MoyeCharles Rollins
![Page 2: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/2.jpg)
BACKGROUND
• Texas-based pipeline company formed in 1985.
• One of America’s largest energy companies
• From 1996 and 2000, revenues increased by more than 750%.
• Scandal revealed in 2001.• Stock price fell from $90 per share to
less than $1
![Page 3: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/3.jpg)
KEY PLAYERS
• Kenneth Lay – Chairman and CEO• Jeffrey Skilling – COO, then CEO• Andrew Fastow - CFO • Rick Causey - CAO• Other Executives
![Page 4: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/4.jpg)
HOW WAS THE FRAUD PERPETRATED?• Poor corporate governance• Fraudulent accounting and unethical behavior
Inflated assets and profits Understated liabilities and losses
• Audit failure
![Page 5: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/5.jpg)
HOW WAS THE FRAUD CONCEALED?• Arthur Andersen• Deceptive transactions• Creative accounting
![Page 6: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/6.jpg)
HOW WAS THE FRAUD DETECTED?• Sherron Watkins• Raptor losses• spotty cash flow
![Page 7: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/7.jpg)
HOW WAS THE FRAUD DETECTED?• Revenue growth report• Stock prices
![Page 8: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/8.jpg)
FRAUD PREVENTION
• Code of Ethics• Ethical Environment• Ethical Management
![Page 9: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/9.jpg)
FRAUD PREVENTION
• Conflict of Interest• Acted as “Auditor & Consulant”• Mark to Market Accounting
![Page 10: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/10.jpg)
THE IMPACT
• Bankruptcy of Enron• Dissolution of the Arthur Andersen accounting
firm • Employees and shareholders lost billions in
pensions and stock prices• 20,000 employees lost their jobs and health
insurance• Changes in corporate governance• Sarbanes-Oxley legislation
![Page 11: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/11.jpg)
SARBANES-OXLEY ACT
• Passed in response to recent accounting scandals
• Anti-fraud legislation• Aimed to protect investors• Corporate accountability• New financial reporting responsibilities
![Page 12: THE ENRON SCANDAL](https://reader035.vdocuments.pub/reader035/viewer/2022081419/568163f7550346895dd58c35/html5/thumbnails/12.jpg)
QUESTIONS?