Chapter 15 From collapse to convictions: a timeline

From collapse to convictions: a timeline
http://www.cbc.ca/news/background/enron/


Summary:
The former chief executive officer,Kenneth Lay, of Hunston Natural Gas, then later he became CEO of the company. He started operation Enron(company) as an interstatepipeline company created from merger of Houston Natural Gas and Omaha-based InterNorth at 1985. By 1999, the company soon became the largest business site in the world. Ninty percent of Enron's income came from tade over Enron Online(and online trading website). The annual revenue keep hitting $100 billion US in 2000, making it Fortune 500 and the sixth largest energy company in the world. The stock price of the compnay peaked at $90 US. But after 2001, the cracks began to apear. In October of 2001, Enron reported a loss of $618 million, by that time Jeffery Skilling is the CEO. Chief financial officer Andrew fastow was replaced and the U.S. Securities and Exchange Commission launched an investigation into investment. The investgation show that complex web of parterships was designed to hide Enron's debt. On Dec.2,2001, Enron filed for bankruptcy potection in the biggest base of bankruptcy in the United States up to that point. The next month, the U.S. Justice Department opened its investigations of the company. Ken Lay and former CEO jeffrey Skilling were both convicted in May 2002.

Connection:
The above article relates to the study of financial statements in many ways. In Chapter 15 Analyzing Financial Statement, we are taught Users of Financial Statements, Comparing Financial Data, Simple Rations and Percentages,etc. In the above article the company named Enron was using fake financial statements, the insiders of the company such as its owners and executive & management groups known what is going to happen to the company and they made this decision to hide the real financial statements. The auditor of the financial statement is inresponsible , its rather the auditor didn't analyzing the financial statement well or he knews it but still passed it on.

Reflections:
After reading this article, I'm really surprised about they doing the fake financial statement.Normally, I thought that a big company wouldn't do such things. Also, i think the auditor is really inrresposible. The auditor's job is to make sure every information of the financial statement is 100% true but the auditor of Enron's company didn't find out or already knew that the financial statment is fake and passed it on. I think he should be punished too.