Forensic Accounting

Enron was an American energy company that was based out of Houston, Texas, it ventured out into other states and became one of the world's leading electricity, natural gas, communications, and pulp and paper company.. It employed approximately twenty-two thousand staff. Its founder is Kenneth Lay and was founded in Omaha, Nebraska in 1985. It was named "America's Most Innovative Company" for six consecutive years and one of the 100 best companies to work for in America by Fortune Magazine. Enron's name from beginning to 1995 stocks rose by three hundred and eleven percent. It was a company to be a part of, making millions and owning a good majority of the United States, until October 2001.

The company was using accounting limitations to misrepresent earnings and modify the balance sheet to make the company look like it was doing better than it actually was. Over the years of doing these fraudulent things was what brought the company crashing down! Enron's accounting firm seem to have been reporting income and reported cash flow up, asset values inflated, and liabilities off the books, which later led to Enron filing bankruptcy. Enron always seemed to find ways to hide their debt, they would make up inventory that wasn't there and accounts that they didn't have. It was quite sad; I don't understand how they were able to get away with it for so long.

Enron had many fraud inquiries set-up for their employees and internal control to look for. They had a sophisticated financial risk management tools set-up, it was crucial to Enron because of its business plan. Enron's aggressive accounting practices were not hidden from the board of directors. Enron's auditor, Arthur Andersen, who was accused of applying reckless standards in their audits because of conflicts of interest over the significant consulting fees. Arthur Andersen firm, was once one of the "Big Five" accounting firms, that provided auditing, tax, and consulting services.

Enron hired many Certified Public Accountants as well as accountants who knew very well the Financial Accounting Standards Board, but they also looked for loopholes in the Generally Accepted Accounting Principles.

So by the time this entire sandal was over and the company filed Chapter eleven bankruptcies, the majority of the employees left with nothing and the rest:

*Eighteen plead guilty

*Kenneth Lay was convicted but died before sentencing

*Jeff Skilling was sentenced to 24 years and 4 months

*Dan Boyle was sentenced to 3 years and 10 months

*James Brown was sentenced to 3 years and 10 months

*Shelia Kahanek and Michael Krautz found not guilty

*Arthur Andersen