A Business Failure: Enron
August 22, 2011
The Enron scandal was a corporate scandal involving the American energy company Enron Corporation based in Houston, Texas and the accounting, auditing and consultancy firm Arthur Andersen that was revealed in October 2001 (Wikipedia Enron Scandal 2001).
All of this started when there was a loophole discovered in the accounting department when they were allowed to book large sums of money from energy-derivative contracts at their gross value and not their net value. This tactic although legal many analysts and investors saw what Enron was doing. This was called the distorting technique which allowed Enron to become one of the largest companies in the world.
All of the hiding came from within Enron’s balance sheet. To let you in on Enron’s hidden success, Enron was allocating all of there money to independent private partnerships. This strategy showed that Enron’s market share was sky-rocketing to levels never seen before. The thing that was kept hidden was Enron’s asset and liability portfolio. Between 1996 and 2001, Enron reported an increase in sales from 13.3 billion to 100.8 billion (Forbes, 2001).
In 2002, there were reports starting to come out about Enron’s wrongdoing. Everyone believed at the time that the Bush administration was telling the truth about what was going on at Enron. Now that Enron is bankrupt, many still believe that there was ever any wrongdoing at Enron. Even though the American people thought nothing ever happened, the Enron executives had to have done something wrong for the business to collapse.
Although many think that leadership was absent from the executives minds at Enron, the decisions often lacked honesty, integrity, and that it was not there fault, the executives came out and said that they did not understand the accounting...