Synthesis Accounting Scandals

In: Business and Management

Submitted By krishia
Words 1782
Pages 8
Baluyot, Krishia Mae E.

BSAV-2A

Scandals that Rocked the Accounting World

❖ Enron Scandal

The Enron Corporation led to bankruptcy Last October 2001. It is an American energy company based in Huston, Texas, and the termination of Arthur Andersen, which was one of the biggest audit and accountancy partnerships in the world. Enron is also attributed as the biggest audit failure.

Enron was founded in 1985 by Kenneth Lay after merging Houston Natural Gas and Inter North several years later. When Jeffrey Skilling was hired, he developed a staff of executive that, with the use of accounting loopholes special purpose entries, and poor financing reporting, were able to hide billions in debt from failed deals and projects.

Shareholders lost nearly $11 billion when Enron's stock price, which hit a high of US$90 per share in mid-2000, plummeted to less than $1 by the end of November 2001. The U.S. Securities and Exchange Commission (SEC) began an investigation, and rival Houston competitor Dynegy offered to purchase the company at a fire sale price. The deal fell through, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Enron's $63.4 billion in assets made it the largest corporate bankruptcy in U.S. history until WorldCom's bankruptcy the following year.

Many executives at Enron were indicted for a variety of charges and were later sentenced to prison. Enron's auditor, Arthur Andersen, was found guilty in a United States District Court, but by the time the ruling was overturned at the U.S. Supreme Court, the firm had lost the majority of its customers and had shut down. As a consequence of the scandal, new regulations and legislation were enacted to expand the accuracy of financial reporting for public companies.

❖ Bank of Credit and Commerce International

The Bank of Credit…...

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