Enron – The Biggest Fraud in History

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Enron is a company that achieved great heights in its career, being a wall street
darling trading $90.75 at its peak. The company made profit from different from different
sectors such as energy, broadband and specially trading. But did you ever wonder why
this successful company that took years to grow collapsed in just less than a month?
This is how Enron, from the seventh largest corporation in US fell to being the largest
scam in the history.
Enron formulated many tricks and techniques that made their name shining to
the investors, outside parties and the general public, although they are running on the
opposite direction. Let us see how their internal control and poor management led them
to their fall. First, the management tolerated fraud inside the entity, this is when the
CEO acted blind on the wrong doings of his employees for as long as they made money
for the company. This became the first red flag for the CEO because when these traitors
were convicted, they lost people making money for them even though doing it in a
fraudulent manner. Next, the mark to market accounting, Enron also used techniques
that made their financial statements “look good”. This is one of the biggest reason why
Enron failed on its business, This accounting technique that was used by Enron made
them appear ascending by “cooking its books” recording profits or investment even
though they are not sure if it will fell through. Their accountants and the CFO also made
their debts disappear to be able to show the investors that they were making profits.
Accounting methods are important factor in the success of the business otherwise it will
be fraudulent. Next, the CEO being a big risk taker, the CEO holds the biggest influence
in the movements of thee company, Enron lost billions of dollars on project around the
world that didn’t work because of poor planning, that is why they left many
infrastructures in the ruins, but even though experiencing great losses Enron’s
executives recorded future profits from these projects in their books and was also giving
themselves millions of bonuses. After that, Enron also manipulated the markets, they
increase the price of commodities such as electricity to basically squeeze every single
penny from the people. They defy laws and regulations just to make money for
themselves, at the expense of the people. You could ask why these people easily
manipulate markets and defy law, here’s why. The President of the U.S. at that time
was a good friend of Enron’s founder, also the chairman of the Energy Commission was
personally recommended by him. These two parties refused to step in and correct the
fraudulent behavior of the company because of connections that they personally have.
And lastly, Skilling, the CEO resigned of its duties before anything goes wrong, on the
midst of losing control of their business and starting to fall, the source of all this
problems suddenly stepped out to simply make it look like everything is alright when he
was still in position. After he left, the details about the overwhelming corruption and
fraud inside the company suddenly came out, this made Enron’s fall clearer in sight.
The main reasons on why Enron fell on its business is its management and
internal control, he use of fraudulent accounting methods, to simply make them look
profitable, and also the manipulation of businesses in order to make money. The
management being greedy of profits and success simply added fuel to the fire. They
created their own ticking bomb waiting for it to explode before their eyes. The poor
representation of financial statements that is basically wasn’t audited using the right
standards pull them through the years, but they already knew that it won’t last forever,
they will eventually lose everything when they lost their gold mine. This story of the
biggest scam in the history will make its mark as an example on how important
accounting policies and standards is in business undertakings. Fraud, negligence and
misconduct would never be hidden forever, that is why we have auditing. This will
simply conclude the importance of accounting in business sectors, such that without
proper accounting, businesses will simply won’t work.