The Enron scandal and the Sarbanes-Oxley-Act

Seminar Paper , 2009 , 16 Pages

Business economics - Miscellaneous

The downfall of Enron was one of the most momentous corporate scandals and bankruptcies in the history of the United States of America. This assignment deals with the timeline of Enron’s collapse and introduces the main charges against the company and it’s Board of Directors. Ultimately, the Sarbanes-Oxley Act will be presented as major legislative response to this corporate fraud, before concluding with weighing the costs and benefits of this large-scale legislative project.

-This paper provides a fundamental overview of Enron's collapse and the effects of the Sarbanes-Oxley-Legislation-

Inhaltsverzeichnis (Table of Contents)

• Enron's business
• Timeline of the collapse
• Charges against Enron
  • Off-the-books activities
  • Conflicts of interests and lack of supervision by the Board of Directors
  • Compensation of the company's management
  • Lack of independence of the Board and the auditors
• The Sarbanes-Oxley Act of 2002
• Costs and benefits of the Sarbanes-Oxley Act

Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)

This assignment examines the Enron scandal, one of the largest corporate bankruptcies in American history. It presents a timeline of Enron's collapse and outlines the major charges against the company and its board. The assignment then focuses on the Sarbanes-Oxley Act, a significant piece of legislation introduced in response to the scandal, concluding with an analysis of the act's costs and benefits.

• The Enron scandal and its timeline
• The charges against Enron and its board of directors
• The Sarbanes-Oxley Act of 2002
• The costs and benefits of the Sarbanes-Oxley Act
• The impact of the scandal on corporate governance and accounting practices

Zusammenfassung der Kapitel (Chapter Summaries)

Enron's business

This chapter explores the evolution of Enron's business model from a traditional energy supplier to a complex trading company dealing with contracts for gas, oil, and electricity. The chapter delves into the company's use of mark-to-market accounting, a practice that allowed Enron to book the full value of contracts immediately, regardless of actual cash flow. This practice, while approved by the Securities and Exchange Commission, contributed to an inflated view of Enron's financial performance.

Timeline of the collapse

This chapter outlines the critical events leading to Enron's collapse, starting with the auditors' concerns about Enron's Special Purpose Entities (SPEs) in 2001. The chapter recounts the resignation of CEO Jeff Skilling and the internal warnings raised by Sherron Watkins, a vice president, about accounting irregularities and conflicts of interest within Enron. Ultimately, Enron's reliance on SPEs, coupled with declining stock prices, led to liquidity problems and ultimately, bankruptcy in December 2001.

Schlüsselwörter (Keywords)

The Enron scandal, corporate fraud, Sarbanes-Oxley Act, corporate governance, accounting practices, Special Purpose Entities (SPEs), mark-to-market accounting, off-balance-sheet financing, conflicts of interest, audit independence, financial regulation, corporate responsibility.

• College: University of Applied Sciences Hof
• Author: Andreas Bauer (Author)
• Publication Year: 2009
• Pages: 16
• Catalog Number: V132463
• ISBN (eBook): 9783640386000
• ISBN (Book): 9783640385690
• Language: English
• Tags: SOX, Enron, Sarbanes-Oxley-Act, Corporate Governance