In Accounting a lot of things can go wrong whether you know about it or not, so lets talk about a company named Enron Corporation and what went wrong. Enron Corporation was an American energy, commodities, and services company based in Houston, TX that filed for bankruptcy in late 2001. The company used its “partnerships” with the many companies it created to hide its losses and its debts. Enron executives also ignored accounting irregularities and calmly kept millions in stock-market gains, even though they surely knew that company employees who had stock in the organization were going to suffer when everything came out. So lets start at the beginning, Enron started in July of 1985 when Houston Natural Gas merged with InterNorth and came up with a new name, “Enron”. In an 18-year span Enron grew to be one of America’s largest companies led by a man named Kenneth Lay who was the CEO. Kenneth Lay was an optimistic man and was very eager to do things a new way. By the summer of 2000 the stock was at a tremendous all time high and sold for more than 80 dollars a share. Enron was doing great by what you could see, but the problem was with what you couldn’t see, the record books.
Enron was one of many major corporations that were guilty of this at the time. They inflated their profits. But at the end of 2001 things were not looking good for them, so they made a common move, they restated their profits for the past four years. Enron could not deal with their debt though so they did the next thing that was the only thing that to do, they filed for a chapter 11 bankruptcy. If things had worked out for them they could have gotten away with hiding millions of dollars in debt by hiding it in confusing partner agreements.
When they restated their funds it showed huge differences of money from what they had posted and what they restated it as. They brought the trouble on themselves. If someone hadn’t become suspicious, then they could have gotten away with it for a few more years but they would have eventually been caught.
Arthur Andersen who was the auditor for Enron also contributed to its demise by failing to provide shareholders, employees and interested parties with “reasonable assurance” that Enron’s financial statements presented a true and fair view of the company’s financial position. Arthur also…