1. WHO IS ENRON?

Formed in 1985 by Kenneth Lay after

merging
Houston Natural Gas and InterNorth
Enron was an energy trading
company that shipped natural gas
through pipelines.
Enron made its money by buying and
selling energy contracts.

2. What went wrong with

the case?
Fraud in securities, wire and mail
fraud.
Money laundering and conspiracy.
Auditor also convicted of obstruction
of justice.
Three bank British workers indicted.

3. What are the red flag?

reporting over $100 billion dollars in
sales.
massive amount of debt that Enron
was hiding from its balance sheet
used to inflate revenue numbers by
manipulating projections for future
revenue.
the numbers were on the books so the
stock prices remained high, but Enron
wasn't paying high taxes.

4. Who should be blame?

A number of top Enron executive.
Arthur Anderson the audit company.
3 British bank workers.

5. Do the company have a good

corporate governance
They failed to maintain good relation
with their stakeholders. They never
fulfilled stakeholders obligation.

6. How Enron Shows a Fantastic

Revenue
use an accounting method known as
"mark to market.
this technique was used to inflate
revenue numbers by manipulating
projections for future revenue.
this technique allowed Enron to make
money and grow without bringing in
a lot of taxable cash.

 buying any new venture that looked

promising as a new profit center.
forming off balance sheet entities (LJM, LJM2,
and others) to move debt off of the balance
sheet and transfer risk for their other
business ventures.
SPEs is a corporation that is created usually
to carry out specific purpose.
Enron hide debt in the SPEs was by selling
assets to SPE, which had borrowed money in
order to purchase the asset.
Enron make a loan but recorded as a
revenue.

Question 8
What are the consequences or
implications arise from the case?
Economics
Thousands of the employees lost their jobs.
Citizens trust in the American economic system was
destroyed.
Losses on the financial market amounted to the worst
stock value loss
Change in auditing world
The auditing firm lost its accreditation especially
Arthur Anderson
Lost of the integrity
The rules for company financial reporting were
drastically sharpened: Sarbanes Oxley Act (2002)

Question 9
What happened to Kenneth Lay &
Jeffrey Skilling.
Kenneth Lay already died-heart
attack
Jeffrey Skilling-24 years prison.