SUMBITTED BY

TAZEEN ZAHRA

ROLL NO: 2336-BCOM-18

SUMBITTED TO

SIR. HESAN ZAHID

COURSE: CORPORATE GOVERNANCE

B.COM (Hons.)Session 2018-22

Department of Commerce & Finance

Government College University,

LAHORE.
Summary:

Enron was unable to deliver the profits promised to investors. Enron began constructing partnerships and
other odd arrangements as a result of the (SPE) special purpose organization. Enron used these firms to
keep its losses and debts off its books, allowing it to keep its credit rating and create a positive image to
investors. The true purpose of Enron was to defy the laws of consolidation while simultaneously
strengthening their own credibility. SPE transactions Raptors and JEDI assisted financial reporting fraud.
The goal was to escape being consolidated by deliberately failing to achieve certain conditions that would
have revealed Enron's true financial situation sooner.

Enron decided that finding external investors willing to sign financial agreements with Enron was the best
method, and typically provided a guarantor or other type of credit aid to enable the SPE to get funds from
the market. Enron's SPE accounting technique, on the other hand, was preoccupied with an accounting
trial to see if SPEs could be merged or not, and as a result, Enron was able to handle its SPEs off-balance-
sheet. Because of this money, rating agencies have given Enron a higher rating. Since then, significant
debts have been transferred to affiliates, as have additional liabilities from US companies to Enron's
SPEs. Agreements that were expected to result in losses were noted generally in the company's financial
reports. Enron's financial statements for the previous four years did not accurately reflect the company's
massive debts, as it revealed on October 16, 2001, that it had already lost $618 million in the
corresponding period and on November 8, 2001, that it had exaggerated its profits by $586 million from
1997. In order to appeal to investors, Enron inflated its financial reports, indicating profits rather than the
actual loss.

The company was compelled to declare bankruptcy in December 2001 as a result of the investigations. In
May 2006, Jeffrey Skilling, Enron's former CEO, was sentenced to 24 years in prison, while Kenneth
Lay, the company's former chairman, died of a heart attack in July 2006. Enron's stock has plunged to
$8.63 per share as well.