Financial Reporting on Enron Case Study Example | Topics and Well Written Essays - 4500 words

Financial Reporting on Enron - Case Study Example But as the time passed by the firm's business mix shifted from the regulated transportation of natural gas to unregulated energy trading markets. Since in the energy trading more money could be made in buying and selling financial contracts linked to the value of energy assets than in actual ownership of physical assets. Because of its business nature Enron's reported annual revenues grew from under $10 billion in the early 1990s to $101 billion in 2000, ranking it seventh on the Fortune 500 (Benston 2002). First, briefly it is important to know what happened which led to the ultimate bankruptcy and collapse. Enron was in the business of energy trading and distribution. It all started with Jeffery Skilling who replaced Kenneth Lay as CEO quitted from his position and Kenneth Lay became the CEO again. Another event of importance was the role of Enron's Chief Financial Officer, Andrew S. Fastow; he was responsible for handling all the off shore partnerships for the company; his actions led to hiding of around a billion dollar debt through these off shore drilling partnership businesses. This was one of the bases which led to the collapse of Enron when it was disclosed. And the admission was made regarding overstatement of profitability of Enron by hiding some of the debt; when the matter was disclosed Enron's share price came slashing down and the company lost its credibility in the financial markets. No one was ready to forward any loan so that the company can come out of the ditch of b ankruptcy. The collapse of Enron badly effected the retirement savings of the employees as these were linked to the stock prices which plummeted badly hence, effecting the employees' savings. An important thing to point out is that the accountants, Arthur Anderson did not indicate at any moment the worsening financial situation of the company. Thus, in the end the accountants, Anderson and the Enron shredded the company documents that reflected the audit reports and employees that were against this were fired (Beams 2002). What do we identify after Enron's implosion that we did not identify before it The conventional perception is that the Enron debacle exposes basic flaw in our current system of corporate governance. Conceivably, this is so, but where is the flaw located Beneath what conditions will critical systems fall short Chief debacles of historical dimensions (and Enron is certainly that) tend to produce a surplus of explanations. In Enron's case, the firm's strange breakdown is becoming an effective Rorschach test in which every commentator can observe evidence verifying that what he or she previously believed. However, the problem with viewing Enron as a sign of any methodical governance collapse is that its nucleus facts are maddeningly only one of its kinds. Most obviously, Enron's governance structure was sui generis. Other public corporations just have not certified their chief financial officer to run a self-governing entity that enters into billions of dollars of risky and unpredictable trading transactions with them; nor have they permitted their senior officials to profit from such self-dealing transactions with no wide direction or even understanding of the profits involved. Neither have