Enron Scandal
ABdul Moeez Khan
29014
Dr.Ayesha Rehan
Auditing&assurance
Breif Summary
• One of the greatest and most significant accounting
frauds in American history.
• 7th largest corporation in the united states in 2001, filed
for bankruptcy at the end of the year.
• Greedy top executives led an immoral path to quick
money, Social greed influenced many to lose sight of
morla acts and thinking consciously of their decision
• Result: 22000 workers unemployed, 401k's diminished,
$60 billions of debt
Enron
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In 2001, They were the world's leadin Energy company
$90 per share in the year 2000
22,000 Employees
Power house of trading energy
Hierarchy of Enron
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Fonder: Ken Lay
CEO: Jeff Skilling
CFO: Andy Fastow
Former Vice President :Sherron Watkins
Revenue Recognition
• The company showed entire sales values as revenues in
its financial statement .
• As a result , revenues increased from $13.3 Billion to
$100.8 Billion.
• This 65% annual increase was unprecedented in the
energy industry wherein growth is considered
respectable.
Mark-to-Market Accounting
• Skilling demanded that the trading busniess adopt markto-market accounting , citing that it would represent true
ecnomic value
• Investors were giving flase reports due to large
discripencies
• Enron recognised estimated profits of more than $110
from Enron-Blockbuster deal
Special Purpose Entities
• Enron used speacial pourpose entities that were used to
fund or manage risk .
• Investers were fooled by this because for them there were
no debts.
• SPE were funded by investment banks , other institutional
investors .
• SPE was backed by enron stock
• SPE held many billion $ worth of losses
After Math
• Enron's shareholders lost $74 billion in the four years
before the company's bankruptcy
• 401k lawsuit was won by the employees
• Enron scandal lead to the passage of the Sarbanes-Oxley
act
Thank you
Any Questions