The Enron Scandal was an accounting scandal involving the Enron corporation. The Enron Corporation was an American energy, commodities, and services company headquartered in Houston, Texas. Enron's predecessor was the Northern Natural Gas Company, founded in 1932 in Omaha, Nebraska. It was reorganized in 1979 as a parent subsidiary of a holding company, Inter-North, which was a diversified energy and energy-related products company. In 1985 it bought the smaller, less diversified company Houston Natural Gas. The company was initially called "HNGInter-North Inc., but was later renamed Enron". Enron's Business Segment Enron originally engaged in the transmission and distribution of electricity and natural gas throughout the United States. The company has developed, built and operated power plants and pipelines, while maintaining regulatory compliance and other infrastructure around the world. Enron owned a vast network of pipelines that stretched from ocean to ocean and border to border. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay What made it a scandal? In the 1990s, corporate self-regulation in the United States of America was thought to have reached a high level of successful evolution due to the proliferation of best practices and sophisticated institutional monitoring. When Enron became the largest seller of natural gas in North America in 1992, its gas contract trading earned $122 million (before interest and taxes), the second largest contributor to the company's net income. However, Enron's bankruptcy shook the entire system. Some highlights that came to light when this scandal was uncovered were: $30 million in self-reported transactions by the CFO; $700 million in net profits disappeared; $1.2 billion in equity capital disappeared; Over 4 billion dollars. in hidden liabilities. Many of Enron's reported assets and profits were inflated or even entirely fraudulent and non-existent. Debts and losses were attributed to entities formed "offshore" that were not included in the company's financial statements, and other sophisticated and arcane financial transactions between Enron and related companies were used to eliminate unprofitable entities from the company's books. By the fall of 2000, Enron was beginning to crumble under its own success. CEO Jeffrey Skilling hides financial losses from the company's business and other operations using mark-to-market accounting. This technique measures the value of a stock based on its current market value rather than its book value. Therefore, it could be potentially disastrous for companies that do not trade real securities. For Enron, these accounting practices help deceive investors and other stakeholders. The company would create an asset such as a power plant and immediately claim the expected profit on its books. Therefore, even if the project or asset were to become unprofitable, the expected profits would make it look like a success. Similar fraudulent accounting activities were undertaken by the company to appear more profitable than they actually were. Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay The Ending By the summer of 2001, Enron was in free fall. CEO Kenneth Lay retired in February, handing the position over to Jeffrey Skilling. Additionally, in August 2001, Skilling resigned as CEO citing personal reasons. More or less the same.
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