The Collapse of Enron

Paper Summary:

The paper discusses the background of Enron and of the Sarbanes-Oxley Act. The paper explains the main factors that contributed to Enron's bankruptcy that include the failure of corporate governance, high risk accounting transactions, inappropriate conflict of interest transactions and extensive undisclosed off-the-books activities. The paper also reveals the excessive compensation for company executives, the auditor independence and the financial and social ties between Enron and members of the Board of Directors.

Outline:
Enron's Background
Sarbanes-Oxley Act's Background
Failure of Corporate Governance
High Risk and Improper Accounting
Inappropriate Conflict of Interest Transactions
Extensive Undisclosed Off-the-Books Activities
Excessive Compensation for Company Executives
Auditor Independence
Board Independence

From the Paper:

"The deregulation of the energy market facilitated Enron's transformation from a regulated natural gas company into one of the world's largest energy traders. A major portion of its business was trades of derivatives. These transactions were extremely risky, complicated and expensive. Enron focused on three new global markets: water, international energy brokerage, and broadband communications. It had stakes in nearly 30,000 miles of gas pipeline, owned or had access to a 14,000-mile fiber optic network, and had a stake in electricity generating operations around the world."

Sample of Sources Used:

• 24 Days
• <http://www.sarbanes-oxley.com>
• "Whistle blowing, Enron and Sherron Watkins: Effectiveness Reconsidered"-Heather Hails
• <http://www.nytimes.com/packages/html/business/20020115_enron_FALL/>
• Public Company Accounting Oversight Board <http://en.wikipedia.org/wiki/Public_Company_Accounting_Oversight_Board>

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