This website uses cookies to ensure you have the best experience. Learn more

Enron Failure Essay

1252 words - 5 pages

The Enron Company began in 1985 when, Internorth, a pipeline company based in Omaha Nebraska, bought Houston-based Houston Natural Gas. At the time the distribution chain of natural gas was highly regulated by the government. Enron and other companies rallied against this and soon the distribution was deregulated. As this was taken place slowly, the natural gas market became more efficient, but also much less predictable. Because of the market instability, the producers and the utility companies were uncomfortable entering into long-term, fixed contracts. Therefore, most natural gas transactions were done in 30 day contracts.This is when Enron transforms itself into a different company. Around 1990, Enron started acting as a liaison, or market maker, for the 30 day contracts, called the Gas Bank. Enron would gather many of these contracts from different producers and then offered long-term, fixed price contract to local utility companies. In essence, Enron was putting the risk upon itself, for a fee. This was the turning point for Enron and for the entire natural gas market.By the year 2000, Enron had branched out and was serving as a liaison for electricity, oil, and even paper. In February of 2001, Enron was named in Fortune magazine as the most innovative company in America for the sixth straight year in a row. Enron experienced rises and falls just like other companies, but what happened in October 16, 2001, made Enron one of the most extensive and most high-priced accounting scandals of all time.That year Enron released its third quarter earnings; it was released by the press as recurring, net income of 393 million dollar, up from last year's earnings of just 292 million. The problem was that Enron's CEO, Kenneth Lay, after emphasizing Enron's "continued excellent prospects" failed to explain the company 1 billion dollar special accounting charge, or expense, which caused its actual results for the period, reported according to generally accepted accounting principles, to be a $644 million loss. This obviously caused alarm in Wall Street and spurted an investigation into the 1 billion dollar charge.Two days later, John Emshwiller and Rebecca Smith, two reporters form The Wall Street Journal, discovered that the billion dollar charge came from related-party transactions with certain special partnerships established by Enron's CFO. These questionable partnerships, Enron's revenue-reporting practices, and about the overall corporate customs have caused huge suspicion over Enron, a suspicion that was borne out as more details about these partnerships, about Enron's revenue-reporting practices, and about the general corporate culture came out to light.So what were these special partnerships established by Enron? Special Purpose Entities or SPEs are when companies outsource certain part of the company. For example, if a company wants to outsource its janitorial servicing, but there isn't one in the area, the company could help its own janitors...

Find Another Essay On Enron Failure

Enron Corp. was one of the world's largest energy, commodities and services companies

575 words - 2 pages deregulation of electrical power markets, a change due in part to lobbying from senior Enron officials. Under the direction of former Chairman Kenneth L. Lay, Enron expanded into an energy broker, trading electricity and other commodities.Symptoms of Enron's problemsThe symptoms of Enron's problems can be attributed to a variety of unethical corporate practices. These lofty and irregular practices led to the company's failure in many respects, most

Fundamentals of Business for Managers Essay

1237 words - 5 pages What brought about Enron's collapse?The lack of corporate values brought about Enron’s collapse. Enron's failure can also be attributed to the arrogance and greed. The company's bankruptcy was brought on by dishonesty and fraud. But in fact Enron's bankruptcy was an event of greater cultural import than either the Left or the Right perceives. It represented the failure of corporate values.Enron traded energy, at first. It was good at

The ENRON scandal: The downfall of the ENRON corporation

1270 words - 5 pages Enron began business in 1986 as a result of the merger of two natural gas companies intent on creating the first nationwide natural gas pipeline. Enron wanted to take advantage of the newly deregulated markets for energy and become a market middleman for energy. They wanted to accomplish this by bringing together buyers and sellers of energy, in addition to delivering natural gas. But instead of simply bringing buyers and sellers together, Enron

Enron's Fraudulent Accounting and Financial Information

1013 words - 4 pages did not need to state this on their financial statements. Enron violated the GAAP through: 1. Incorrect accounting of Special Purpose Entities (SPEs) including failure to consolidate, selective use of equity methods of accounting and failure to eliminate the impact of transactions. 2. Failure to provide complete disclosure 3. Unfair financial reporting. It is apparent that both Enron and Anderson viewed GAAP as rules rather than

enzon

3637 words - 15 pages Swartz, M and Watkins, S, "Power Failure: The Inside Story of the Collapse of Enron", 2003, Library -Publication Data , USA, ISBN 0-385-50787-9 Wells, J.T., "Corporate Fraud Handbook. Prevention and Detection", 2004, New Jersey, The Association of Certified Fraud Examiners, Inc. , USA. ***, "Enron's Fastow gets six-year term", BBC news on line, http://news.bbc.co.uk/2/hi/business/5380394.stm , retrieved Sunday, March 25, 2007. ***, "Enron's Skilling

Enron Stakeholders

1708 words - 7 pages ). These are just a few cases that led to the failure of the "World's Leading Company." In 1985 Houston Natural Gas merged with InterNorth, of Omaha, Neb., to form Enron and Ken Lay was named chief executive officer. The company was basically a producer of natural gas and had control over enormous reserves throughout the oil belt. The Valhalla trading scandal was the beginning of the end for Enron. Enron acquired the Valhalla trading group

Enron's Audit

952 words - 4 pages , it is extremely difficult to detect well-concealed fraud. However, people tend to believe there is an audit failure when the company fails although an auditor conducted correct audit report. In my opinion, Enron went bankrupt because of a business failure not because of an audit failure.To detect the fraudulent accounting by Enron management, Andersen should have communicated with all levels of employees. For example, they could have engaged other

Enron Ethics

1727 words - 7 pages case of ethical failure consists of more than a series of questionable business dealings. Enron employees, who had been encouraged to invest heavily in the company, found themselves unable to remove and salvage their investments. The company culture of individualism, innovation, and aggressive cleverness left Enron without compassionate, responsible leadership.Leadership mechanisms and organizational culture at EnronLeadership is the critical

The particular causes of Enron's failure

1427 words - 6 pages The particular causes of Enron's failure are complex. There are lots of issues that have to do with the Enron collapse. Enron is a company that was called as Houston Natural Gas and then Enteron. It becomes politically connected player in the new deregulated market of energy. At one time Enron appears to have been a successful and innovative enterprise, principally engaged in trading and dealing in energy-related contracts. At some point it

Business Failure

964 words - 4 pages capital funds and hoped to cover up any risk to new backers. With the new accounting process in place it became necessary to continue the scam year after year. Regardless of the cover up, the executives of the company wanted to move forward (Time).Failure of leadership:During the years leading up to the demise of Enron the authority of the corporation did not implement their responsibilities. The committee over seeing the auditing of the financial

Examining a Business Failure Paper

1122 words - 4 pages December of 2001 (Thomas, 2002). The scandal is the most significant corporate collapse in the United States since the failure of many savings and loan banks during the 1980s (Hanson, 2002). The following will identify the management and leadership failures which led to the Enron scandal, as well as how these failures could have been predicted. In addition, the following will also show how proper organizational behavior of management and

Similar Essays

Ethical Accounting Failure: The Enron Scandal

1381 words - 6 pages According to Croxford” Ethical accounting failure has continued to occur in multinational companies in spite of the increased legislation, enhanced corporate governance programs, and greater attention on business ethics by the academic community.” (Croxford, 2010) According to his research, (Croxford, 2010) believed “that accounting professional was discriminated against based on their age, culture, gender, and education.” Multinational

The Failure Of The Enron Corporation

1369 words - 5 pages To explain the causes of collapse for Enron, you must first examine the company history till its downfall and what it actually did as a company.Enron was formed in July 1985 form the merger of two large natural gas line companies called Internorth and Houston Natural Gas in the US. The company began trading natural gas commodities in 1989 and electricity in 1994. The company made extensive use of the internet to broker sales and quickly became a

Write A Executive Summary On Enron Leadership And Its Failure

795 words - 3 pages Though many different explanations are offered for the collapse of Enron, the nation's seventh largest corporation, yet it's leadership was an obvious factor that contributed to Enron's demise. It will be completely erroneous, however, to think that the leaders of Enron were anything but superb. From 1997-2001, the leaders of this company transformed Enron into a "corporation of the new millennium" and a favorite of investors and analysts. Most

The Fall Of Enron Essay

716 words - 3 pages began to design increasingly varied and complex contracts. Customers could insure themselves against all sorts of eventualities such as a rise or fall in interest rates, a change in the weather, or a customer’s inability to pay. By the end, the volume of contracts to actually deliver commodities, and Enron was employing a small army of PhDs in mathematics, physics and economics to help manage its risk. The Failure of Enron As its services became