The Enron Scandal Essay Example

Paper Type:  Research paper
Pages:  3
Wordcount:  698 Words
Date:  2022-11-09

Enron Corporation was an American energy company based in Houston-Texas and was at some point the fifth largest corporation in America. However, the Enron scandal which was publicized in 2001 led to the ultimate downfall of the company where the share prices plummeted from over $90 to below a $1 (Seagal, 2019). The Scandal was mainly attributed to overvaluation of the company through accounting fraud which deceived investors of the true worth of the company and its liabilities. As such accounting and auditing failures culminated to the Enron scandal an event that shocked Wallstreet and made investors lose over $60 billion of dollars in a period of less than 4 years (Seagal, 2019).

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The Enron scandal was unearthed in December 2001 when Enron corporation was found guilty of auditing and accounting fraud to deceive the investors of its assets and liabilities despite the fact that the company was struggling financially. The auditing firm that was in charge of Enron was Arthur Anderson and was dissolved two years after the unearthing of the scandal (Bondarenko, 2019). The scandal was discovered after Enron was found to have lied about its debts and liabilities through false accounting. In essence, the company exploited market to market accounting to lie about its real revenue collection and liabilities. After it emerged that Enron had a debt close to 1 billion USD the Enron scandal ensued (Seagal, 2019).

The major participants of the scandal were Jeffrey skilling who was the former Chief Executive Officer and was found guilty of hiring unprofessional accountants to do erroneous reporting and auditing to hide the debts of Enron from the public (Seagal, 2019). Another participant of the scandal was Arthur Anderson which was the accounting and auditing firm in charge of Enron's financial books. Andrew Fastow who was also the chief financial officer was held accountable for lying to shareholders of the true financial status of Enron Corporation (Seagal, 2019). The owner and founder of the company, Kenneth Lay, was also a participant of the sandal.

The damages and losses incurred after the Enron scandal were massive. Notably, before the scandal, Enron was valued at over $60 billion and the shred s sold at over 90$ a share (Seagal, 2019). However, in a period of less than a year, the company filed for bankruptcy and the share prices plummeted to less than a dollar a share. In addition, people who were directly or indirectly employed by Enron lost their jobs including their lifetime benefits that were tied to Enron's shares. The scandal also had a ripple effect on walls street as investors remained skeptical on trading stocks. Of note, this period was also marked by the dot com bubble which saw the stock prices of most corporation's decline.

The scandal was followed by a series of legal proceedings against individuals who were thought culpable of conducting financial misdemeanors. Author Anderson the firm in charge of auditing and accounting in Enron was the first casualty of the scandal (Li,2010). Despite the fact that the firm was eventually acquitted, this did not save the company from the negative public perception which ultimately led to the dissolution of the accounting firm. The Owner and CEO of Enron, Kenneth Lay, was convicted for fraud and conspiracy but unfortunately died of heart attack during the trial period.


The former CEO of Enron corporation received the harshest sentence of over 24 years in prison and is expected to be released in the year 2028 (Li,2010). In addition, the CFO Andrew Fastow was also sentenced to imprisonment and was later released in 2011 (Seagal, 2019). However, the aftermath of the Enron scandal was the setting up of regulation and control measures in auditing and accounting in publicly traded companies. In conclusion, the collapse of Enron corporation was the largest corporate bankruptcy prior to the Lehman Brothers and devastated its shareholders and the stock market at large. The crash was also as a result of accounting and auditing fraud which led to the Enron scandal.


Bondarenko, P. (2019). Enron scandal | United States history. Retrieved from

Li, Y. (2010). The case analysis of the scandal of Enron. International Journal of Business and Management, 5(10), 37.

Seagal, T. (2019). Enron Scandal: The Fall of a Wall Street Darling. Retrieved from

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