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    Ethical Presentation

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    Enron began as a natural gas pipeline company and later expanded into energy brokering and trading. Under CEO Jeffrey Skilling, Enron adopted aggressive accounting practices like mark-to-market accounting that inflated profits. As energy prices fell in 2001, Enron's deals began losing money and the company's fraudulent accounting was revealed, leading to its bankruptcy. The collapse damaged investors and shook confidence in financial markets. It also led to reforms like the Sarbanes-Oxley Act to increase transparency and prevent similar accounting fraud.

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    Ethical Presentation

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    Enron began as a natural gas pipeline company and later expanded into energy brokering and trading. Under CEO Jeffrey Skilling, Enron adopted aggressive accounting practices like mark-to-market accounting that inflated profits. As energy prices fell in 2001, Enron's deals began losing money and the company's fraudulent accounting was revealed, leading to its bankruptcy. The collapse damaged investors and shook confidence in financial markets. It also led to reforms like the Sarbanes-Oxley Act to increase transparency and prevent similar accounting fraud.

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    Enron began as a natural gas pipeline company and later expanded into energy brokering and trading. Under CEO Jeffrey Skilling, Enron adopted aggressive accounting practices like mark-to-market accounting that inflated profits. As energy prices fell in 2001, Enron's deals began losing money and the company's fraudulent accounting was revealed, leading to its bankruptcy. The collapse damaged investors and shook confidence in financial markets. It also led to reforms like the Sarbanes-Oxley Act to increase transparency and prevent similar accounting fraud.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    47 views19 pages

    Ethical Presentation

    Uploaded by

    api-302652884
    Enron began as a natural gas pipeline company and later expanded into energy brokering and trading. Under CEO Jeffrey Skilling, Enron adopted aggressive accounting practices like mark-to-market accounting that inflated profits. As energy prices fell in 2001, Enron's deals began losing money and the company's fraudulent accounting was revealed, leading to its bankruptcy. The collapse damaged investors and shook confidence in financial markets. It also led to reforms like the Sarbanes-Oxley Act to increase transparency and prevent similar accounting fraud.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 19

    Ethical Presentation

    By Brian, Froilan, Lisa, Pedro and Raissa

    Greed is good?

    https://www.youtube.com/watch?v=R8y6DJAeolo
    Enron was a corrupt corporation run by greed with the goal to make a profit.

    The Beginning Presages The End


    Enron was a Houston-based natural gas pipeline company
    Born from the merger of Natural Gas and InterNorth in 1985
    Federal deregulation of gas pipeline in the 1990s
    Jeffrey Skilling created the Gas Bank
    Enron was heavily involved in energy brokering, electronic energy trading, etc.

    The Best, The Brightest and The


    Dreaded PRC
    Skilling changed the corporate culture of Enron
    Hired Andrew Fastow, in 1990
    Skilling: trading operation; Fastow: financing
    Skilling instituted the Performance Review Committee (PRC)
    Employees were regularly rated on a scale

    How High They Fly

    U.S. economy was experiencing the longest bull market in its history.
    In 1996 Skilling became Enrons chief operating officer.
    Gas bank model could be applied to the market for electric energy as well.
    Create a market for: paper, steel, water and even weather.

    How High They Fly

    Enrons most exciting development was the creation of Enron Online (EOL).
    Enron and Blockbuster announced a deal to provide video on demand via high-speed
    Internet lines.
    Touted by Fortune as one of the most admired and innovative companies in the world.

    Mark-to-Market Accounting
    What is mark-to-market accounting?
    Enron began using mark-to-market accounting when Jeff Skilling joined the company.
    Enron inflated earnings using mark-to-market accounting.
    Investors were given misleading financial reports.

    Capitalism at Work
    Profit margins began eroding, end of 2000
    Profit margins ran with increasing leverage
    Energy prices fall, first quarter of 2001
    Deals were made quickly without regards
    Good deal vs. bad deal + NPV

    Capitalism at Work
    World economy
    headed into
    recession
    Dampened energy Reduced opportunity for
    market volatility Enrons profitable gains

    Obscure Disclosures Revealed


    Doubt on the quality of the companys earnings and on the business purpose of the transaction.
    A number of analysts questioned the lack of transparency of Enrons disclosures.
    The market was beginning to perceive the company with greater skepticism.
    Trust and reputation of the company were eroding .

    Complex Special Purpose Entities


    What is a special purpose entity?
    Enron used hundreds of special purpose entities.
    JEDI, Chewco, Whitewing, LJM Cayman.
    Again investors are given misleading financial reports.

    It All Comes Tumbling Down


    February 2001 - Skilling was named the president and CEO
    Stocks price started to decrease
    August 2001 - Skilling himself resigned
    October 2001 - First quarterly loss in more than four years
    Changes on employees pension plan

    It All Comes Tumbling Down


    November 2001 - restatement of its financial statements
    $591 million in losses over the four years
    $628 million in liabilities
    Stock price: less than $10 a share
    November 30 - stock closed at $0.26 a share

    The Aftermath
    threatened financial markets in U.S. & abroad
    GAO requested documents from White House
    impact of Enron hit the government
    Justice Department opened a criminal investigation
    deep ties with the government

    AICPA
    American Institute of Certified Public Accountants
    engaged in damage control
    12/2001 issued toolkit for auditors use
    01/2002 board of directors would fully cooperate
    approved a resolution to support prohibitions

    Where were the Auditors?


    Arthur Andersen, LLC
    External and Internal Accountants are former Andersen Executives
    Auditor-firm relationship conflict

    Did we learn anything?


    Sarbanes-Oxley Act of 2002
    Keep your integrity
    Never take customer and employee confidence for granted.

    Works Cited
    Healy, P. M., & Palepu, K. G. (2003). The fall of enron. The Journal of Economic Perspectives, 17(2), 3-26. Retrieved
    from http://search.proquest.com/docview/212077863?accountid=7285
    Benston, George J, and Al L Hartgraves. "Enron: What Happened and What We Can Learn from It." Journal of
    Accounting and Public Policy, 21.2 (2002): 105-127.
    "Enron." The Social History of Crime and Punishment in America, (2012)
    Regan, MC. "Teaching Enron." Fordham Law Review, 74.3 (2005): 1139-1249.
    Chandra, Gyan. "The Enron Implosion and Its Lessons." Journal of Management Research, 3.2 (2003): 98.

    Questions?
    ?

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