Just finished my homework for tomorrow; erm... for later.

And it should be handwritten, WTF.

BTW, here's the draft: (since these shit are in my thoughts too)

The Enron Scandal Facts:

Exposed in October of 2001, with assets of $63.4 billion, it ultimately led to the largest corporate bankruptcy in U.S. history at that time, if not one of the largest.

Facts:

Enron Corporation, founded on 1985, was an American energy company. Before its demise in late 2001, Enron has employed around 22,000. It was one of the world's leading electricity, natural gas, communications and pulp paper companies. Fortune (a global business magazine published by Time Inc) named Enron "America's Most Innovative Company" for six consecutive years.

It was formed by Kenneth Lay after merging Houston Natural Gas and InterNorth. Years later, Jeffrey Skilling was hired and he developed a staff of executives that were able to hide billions in debt from failed deals and project through the use of accounting loopholes and poor financial reporting.

As a result, on the face of Enron's financial statements, the revenues are inflated, assets are over-valued, and the liabilities are understated. With these, many investors are attracted to put money on the company. This made Enron's stock price to hit a high of $90 per share in mid 2000, before the accounting scandals were exposed.

By the end of November 2001, Enron's stock prices sunk to less than $1, which caused shareholders to lose nearly $11 billion. As a result, the United States Securities and Exchange Commission (SEC) began a thorough check and examination.

Financial statements, which reflect the financial performance of a corporation, should be transparent and unbiased so that prospective investors and other users of it would have the sufficient knowledge about the entity. External auditors should be strictly independent of its client. In Enron’s case, the financial reports were misleading. The next section will highlight on the irregularities on their accounting procedures.

Issues:

Revenue Recognition: Basic Accounting taught us that revenue can only be recognized when they are: (1) realized, and at the same time (2) are earned (usually when goods are transferred/services rendered regardless of when the money/payment are received). In Enron’s case, revenues are always recognized in full value when their agents are closing a deal in a trading operation, disregarding the risks on long-term contracts. This resulted to the large discrepancies in matching profits to actual cash earned.

Use of Special Purpose Entities: Enron used SPE’s to protect itself from financial risks associated to its assets. In reality, SPE’s can be typically used by any company to isolate itself from financial risks. By 2001, Enron has used hundreds of these to hide its liabilities.

Financial Audit: Enron’s auditor firm was Arthur Andersen, which faced demise thereafter the scandal was exposed. Arthur Andersen was accused of applying careless standards in their audit procedures because of a conflict of interest over the huge consulting fees given by Enron.

haha... Gotta go! I have 4 more hours to sleep. ^.^