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1、Enron Case StudyCui Minjie 15620101151932Song Fang 15620101151937Sun Lu 156201011519751aContentlKey ProblemlKey IssueslOur AnalysislRecommendations and Aspirations2aKey ProblemlA strategy of rapid growth ,to be worlds largest energy company, caused many bad implications , including the fraud and che
2、ating and the bankruptcy at last.3aKey Issues1.Deregulation of the gas industry.2.“Mark to Market” accounting and presentation of financial report.3.Using SPE to hide the liability.4.California energy shortage make the citizens resented Enron, damaging Enrons social reputation.5.Skillings abrupt res
3、ignation in Sep,2000 .6.Surprising financial announcements in Oct,2000.7.Dynegy terminating deal with Enron.4aOur Analysis1: Corporate culturelIt cant be denied that Enron is demised by its culture. Besides, its culture is affected by its leaders, such as Kenneth Lay ,Jeffrey Skilling. The failure o
4、f the business transformation ,presenting as Enron broadband Services poor performance in 2001 caused concern that Enrons share price was overvalued.5aOur Analysis2: EthicslBecause of the difference between the law and the ethics, the ethics doesnt have a compulsory effect as the law, its influence
5、depends largely on the companys own free will to comply with. We can see from the Enron events that the strategy of company grows from “aggressive” to “deceptive”, draw up false accounts and report the virtual revenue.6aOur Analysis2: Ethicsl Just because at that time there was no formal law to rest
6、rict the companys behavior, so we can do no more than condemning the companys immorality.l In addition, the greedy of Management layer also accounts for the scandal. Their Ignorance of business ethics leads Enron to fall.7aOur Analysis3: IndependencelEnrons bankruptcy also affected many leading fina
7、ncial institutions who were also caught up in the web of deceit and fraud. Arthur Anderson, the leading Big-5 accounting firm filed for bankruptcy too.lThe outside financial institutions should be independent to supervise, audit and give reliable investing suggestions on Enron. Instead, they all act
8、 on the behalf of their own and become assistants of Enrons crime.8aOur Analysis4: SPE Enron obscured its risk, using SPEs to hide debt in the balance sheet and made profits by selling bad assets to these entities, of course, far beyond the market value.We could not tell when Enron set up the first
9、SPE, but we are too surprised to see how complicated the relationships of them when these hiding companies were disclosed at last. The appearance of conflicts of interest in the partnerships damaged Enrons credibility on the market ,thus leading to a credibility crisis.9aOur Analysis5: mark-to-marke
10、t The use of “mark-to-market” accounting measurement allows Enron to advance the revenue and the profit at the time of signing the contract. Some of the revenue turn out to be virtual.10aOur Analysis 6: Not one time eventlWorldcom scandal：Recharacterize its operating expenses as capital assets.lXero
11、x scandal:lGuangxia（Yinchuan，China）collapse11aRecommendations and AspirationslAs we know, following the Enron scandal, SOX Act ,an act aiming to protect the investors by improving the accuracy and reliability of corporate disclosure was enacted.lStrengthening supervision and control cannot merely rely on independent audit. We ought to trust market efficiency, but we also need to understand that government supervision is inevitable .lThe integrity of all-round education is essential.12a
