Enron Business Fraud

Enron Case

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Hervé Stolowy

HEC School of Management, Paris

Department of Accounting and Management Control

78351 - Jouy-en-Josas – France

Telephone: +33 1 39 67 94 42

Fax: +33 1 39 67 70 86

E-mail: stolowy@hec.fr

Abstract

This case about the Enron Group offers an opportunity to explore many accounting and reporting issues such as accounting information and communication, “quality” and independence of external auditors as well as many aspects of corporate governance. In addition it creates opportunities to discuss ethical issues in business, sociological aspects of business culture and the interaction between business behavior and political circles.

This version: January 9, 2005

Acknowledgements: the author wishes to acknowledge the financial support from the HEC School of Management, Paris (Financements de projets pédagogiques) and from the Research Alliance in Governance and Forensic Accounting funded within the Initiative on the new economy program of the Social Sciences and Humanities Research Council of Canada (SSHRC). He is also grateful to Michel Lebas, for his significant help in the preparation of the English version of this case study and thanks Sophie Audousset for her research assistance.

1. Background information

1.1 Enron

Before its demise into bankruptcy in December 2001, Enron was a global supplier, broker and market maker of energy and related services. Its share of the energy market in the United States and Europe was about 25%. Enron was also developing its activities in any newly deregulated markets such as South America, India and Japan). Although not integrated or balanced, Enron was active at all phases of the energy supply chain: sales of energy (electricity) and, to a lesser extent, sales of energy raw materials (natural gas and oil), construction and management of oil and gas exploration infrastructures, energy production facilities, transport and distribution networks as well as financial and risk...