The Enron scandal was a major corporate fraud case that led to the collapse of Enron
Corporation, a once-prominent energy company, in 2001. The company used deceptive
accounting practices, in attempts to hide debt and low profitable rates from investors, provide a
good financial image and secure loans, and keep its employees from resigning. For instance,
they used SPEs, or Special Purpose Entities, to dump their risky assets into, giving them the
image that the debt from these assets were independent from their company. Additionally, they
used mark-to-marketing accounting to display overly optimistic future earnings, and would
record these estimates immediately to further sugar coat their reputation. In spite of this, they
filed for bankruptcy and its executives were convicted for fraud.​
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Given the events that took place during that incident, it gave insight on what not to do
when partaking in business. The company violated the integrity of financial reporting, all in
hopes of personal gain. Its failure served as a lesson to prioritize ethical practices, transparency,
and accountability in business operations to protect stakeholders and maintain public trust.
Even though they were able to keep up the facade and gain short term gratification, the
negative long term effects were unforeseen, and rightfully so, manifested. Thus, the financial
aspect of business should be taken with integrity, to maintain good relationships with
stakeholders and to transform business owners into competent
References:
Bondarenko, P. (2016, February 5). Enron scandal | Summary, Explained, History, & Facts.
Encyclopedia Britannica. https://www.britannica.com/event/Enron-scandal