THE FALL OF ENRON

Declining Enron in history Enron began to be a pipeline company in Houston in 1985. It promises to provide a very large number of cubic feet to a particular utility company at market price on a particular day. This change is due to lobbying by senior Enron officials because the regulation on the electricity market has been relaxed. Under the guidance of former president Kenneth L. Lay, Enron has expanded to an energy broker for trading electricity and other goods. Enron's business has become a huge mediator like a traditional exchanges hybrid.

The collapse of Enron attracted publicly wide public attention on accounting issues and subsequent auditors' cheating by Arthur Andersen. This report explains the main events of Enron's financial collapse and financial reporting issues. It will also be considered as a matter of accounting standards and auditing. After the investigation began, Enron discovered that it used a complex structure called special purpose entity (SPE) to hide the off-balance sheet taxes and liabilities. SPE is an independent entity created for limited purposes. "According to US GAAP, Enron does not need to combine these SPEs with financial statements if an independent third party controls (over 50%) the economic interests and" significant "capital of the SPE. % Of SPE corporate assets "

The main accounting objective that Enron established the Special Purpose Entity (SPE) is to finance off-balance sheets to hide the bonds. If the relationship between Enron and the SPE meets certain criteria, it is not necessary to integrate the financial statements. In this case, Enron's ideal accounting objective can be achieved. The funds borrowed from SPE are recorded as earnings on Enron 's balance sheet, and Enron has never reported liabilities in its balance sheet. This will make Enron more profitable. As a result, the stock price rose sharply