Enron Corporation Case Study Example | Topics and Well Written Essays - 1500 words

Enron Corporation - Case Study ExampleExecutive Summary round stories are so unbeliev adapted that they become Hollywood movies. One of those stories is the Enron scandal. The movie cal conduct Enron the Smartest Guys in the Room was created found on the Enron story. Enron was once the biggest company in the energy industry, but a complex fraudulent object that began many course of instructions prior to the revelation of the fraud led to its demise. The somatic executives of the company were the primary agents that intentional one the biggest accounting scandals in United States history. Two of the accounting tools that were utilise by Enron to cook up the numbers were market to market accounting and off balance sheet liabilities. The company would own totally 49% of a subsidiary in allege not to have to report liabilities of the entity. Debt from Enron was hidden in thousands of hedge funds or subsidiaries. It was all a huge scam. The organization violated or use to its adv antage a variety of organizational theories. Five of the theories that influenced the behavior of Enron management and its employees were agency problem, corporate culture, teamwork, perception, and leaders. federal agency problems exist at Enron in terms of the yearly bonuses, inside trading activity, and in the partnership plan particularly the LJM partnership. The executive management team colluded with each other in a team effort. The leadership abilities of the top executive managers were outstanding. The corporate culture of the company was based on greed, disloyalty, and unethical behavior. The managers of the company were able to create a perception of a superb company that had tremendous financial performance. This was not truthful since the company was a fraudulent firm. Statement of the Problem Enron Corporation cooked up the numbers by violating the conservativism principle in market to market transactions and used deceptive accounting practices to hide liabilities by creating a complex network of partnerships. The mastermind of the network hedge funds was Andy Fastow. All the top corporate executives were crooked. The traders were unethical and bills hungry. In a partnership called LJM Fastow stole $45 million. The company had a rotten corporate culture where the employees had tough pressures to perform or they would be fired. The company got corrupted and collusion occurred which led to the biggest corporate crime of the 21 century. Analysis of the Problem The Enron accounting scandal was a well orchestrate machine. Prior to the whistleblower revealing the truth nobody knew that the accounting of the company was not truthful. The Securities and Exchange missionary station approved the use of market to market accounting for Enron. They could have never imagined that it was going to be used as a tool for deception and financial fraud. When the company got a new energy occupy they would recognized the profits immediately without any cash comi ng in. The executives exaggerated the benefits of the energy contracts in order to boost profits and receive bonuses and rewards for fake money. The company was creating monopoly money that did not really exist. In the year 2000 the company reported $1 billion in profits. The truth was that they did not make any money whatsoever. The company for years was overstating the value of the energy contracts. As time passed most of the earnings did not limpid themselves. The company in reality was