Enron Corporation and Arthur Anderson

Heather Strawbridge

Accounting 513

Enron Corporation and Andersen, LLP

3/23/15

Enron Corporation was an energy company and earned most of its profits acting as a middleman for consumers and suppliers. Over time the company expanded into various departments, such as Internet bandwidth and financial instruments. To investors and analysts, the company was a gold mine. However, beneath the stock price and attractive financial information was a scandal that would leave Enron in ruin by the end of 2001.

Enron had used SPEs to keep liabilities off of its Balance Sheet which made its financial statements look more profitable than they actually were. However, as the plot started to unravel, many of the suppliers and customers started avoiding Enron. Without the business to finance the loans, Enron would be forced into bankruptcy. Sensing the impending crash of Enron, Jeffery Skilling, the CEO of Enron at the time, left his position after only six months on the job. This action caught the attention of investors and employees because everyone knew that this was Jeffery Skilling’s dream job. Vice President of corporate development, Sherron Watkins, sent a letter to the new CEO, Kenneth Lay, expressing her worry about the downfall of Enron. Lay told his employees that the stock price of Enron is undervalued on the market and not to worry, but all the while, he is selling his stocks in secret. Many of Enron’s employees lost everything they had with the bankruptcy of Enron.

The auditor of Enron, Arthur Anderson, would ultimately suffer the same fate as Enron after the loss of trust from its business partners and clients. However, the reputation loss for Arthur Anderson resulted from multiple companies the firm was auditing even prior to Enron’s scandal becoming public. Arthur Anderson was finding mistakes on Enron’s books and looking the other way. Arthur Anderson was also conducting the internal audit for Enron as well. The ultimate offence that Arthur Anderson...