The Fall of Enron

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The Fall of Enron – Who’s to Blame? By: Leigh Miller Southwestern University Auditing – Accounting 36-524 The Fall of Enron – Who’s to blame? Before filing for bankruptcy in December of 2001, Enron Corporation was one of the largest integrated natural gas and electricity companies in the world. Enron entered the year 2001 as the seventh largest public company in the U.S., only to exit the year as the largest company to ever declare bankruptcy in U.S. History. In 2001, Enron’s stock fell from a high of $90.00 a share to a low of $0.09. (Benston 2003) This drastic downfall of a once great corporation occurred after it was revealed that many of Enron’s profits and revenue were the result of deals with special purpose entities. Arthur Andersen, Enron’s accounting firm, turned their heads while Enron’s management created these special purpose entities that kept hundreds of millions of dollars of losses and debt off of the balance sheet. This then misled investors who were making investment decisions based on false information. This system of using special purpose entities led to an overstatement of profits of almost $600 million dollars and an understatement of debt of $630 million dollars between 1997 and 2000. Arthur Andersen was not the only one releasing misleading information, some of Enron’s senior management also misled investors into thinking the company was a thriving corporation worthy of their investment. The question remains: Arthur Andersen, senior management, Board of Directors or Enron’s audit committee –who is to blame? Enron the Giant Enron was born essentially overnight. In fifteen short years, it went from a natural gas pipeline company in Houston, Texas to an energy broker who traded electricity and other commodities all over the world. Enron, like many others, faced many challenges including a changing workforce, increased
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