Enron Case Study Summary - 976 Words

Enron Case Study The case of Enron is a fascinating one. United States is a country where auditing and accounting principles are so strong. How can something take place on such high level in the United States? The Enron case demonstrates the need to reform the accounting and corporate governance practices in the United States. Moreover, the Enron case made government officials to pay close attention to deregulated energy market. Some of the aspects that struck me are discussed below. One of the aspects that struck me was the vision of the top management. Enron was in the business of energy, but Kenneth Lay built management team of MBAs, not individuals specialized in gas and energy field. My view is that top management has to have a†¦show more content†¦The whole corporate culture was somewhat corrupted. The aspect that jumped out from the case was the relentless pursuit of profits. Yes, the main goal of any business is to make profit, but social values should be kept in mind. I believe that the compensation system at Enron was also to blame. People involved in the scandal were making huge sum of money. The intriguing aspect in this case was how Fastow was able to create special purpose entities (SPE). Fastow was creating these SPEs to segregate financial activities from Enron’s balance sheet. The SPEs provided Enron a way to move debt from the balance sheet so the credit rating could remain high. The commodities swapping mechanism required high credit rating. The SPEs allowed Enron to disguise debt and loss as revenue. Enron deceived investor and creditors. Furthermore, Enron invested in other companies. Once the investments began to show losses, they were transferred to SPEs. This method allowed the sale of investment to SPEs. Hence, the sale of investment was shown as gain to Enron. Another interesting fact was that analysts didn’t raise red any flags. I am sure that many analysts recommended the buying of Enron stocks. This scandal made investors and analysts more cautious. Analysts and investors began to ask questions: 1) how does company make money? 2) Can company sustain strategy over the long term? Basically, the laws got strict and analysts were more observant. These are some of the aspects thatShow MoreRelatedEnron‚Äà ´s Demise ~ Where There Warning Signs?1408 Words   |  6 PagesCase Study Analysis ~ Enron’s Demise ~ Where There Warning Signs? Janise Baldwin Management Decision Making-Summer 2013 C. Forest Guest July 14, 2013 Executive Summary Enron is a company which headquarters is located in Houston, Texas. Enron was first headed by Samuel F. Segnar. Enron was the result of InterNorth’s acquisition of Houston Natural Gas in 1985. Under the new terms of this acquisition, the company was headed by Kenneth Lay on the first day of 1997. 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