The Impact of Enron and Arthur Andersen Case to the Environment

THE IMPACT OF ENRON AND ARTHUR ANDERSEN CASE TO THE ENVIRONMENT

INTRODUCTION

Who would invest in a company without reliable financial statements? Integrity is the hallmark of the accounting profession and stakeholders rely on their work product. Arguably, one of the most respected and successful (at the time) accounting firms in history disappeared due to the actions of a few. Many lost their life savings, jobs, homes, and confidence in the financial system. The demise of the public accounting firm Arthur Andersen and one of its clientele, Enron contributed to drastic changes for publicly held companies, accountants, managers, and others. What is the history of Arthur Andersen and how did it collapse? What happened to those professionals involved with the scandal at Arthur Andersen?

Enron is a company from the merger between InterNorth (supplier of natural gas through a pipeline) with Houston Natural Gas. The two companies merged in 1985. Enron's core business is engaged in the energy industry, later they perform a very broad diversification even in areas that are not related to the energy industry. Diversification from the company includes futures transaction, non-energy commodity trading and financial business activities. Enron case began to unfold in December 2001 and continued to roll in 2002 and gave very broad implications for global financial markets on the mark with decreasing stock prices drastically in various stock exchanges around the world, from America, Europe, to Asia. Enron, a company that was ranked seventh from the five hundred leading companies in the United States and also the largest U.S. energy company went bankrupt, leaving debts for nearly U.S. $ 31,2 billion. In the case of Enron are known the occurrence of moral hazard behavior such as manipulation of financial statements by recording the profit of U.S. $ 600 million while the company suffered a loss. Manipulation of profits due to the desire from the company so the stock remains...