Enron: An Extended

Case Study

Jim Rothwell
Assistant Professor of Accounting
Hickingbotham School of Business
Ouachita Baptist University
The Crooked E: Coincidence or
Prophecy ?

JAMES NIELSEN/AFP
Questions ?
• What happened within the company?
• What was the corporate environment and culture of
the company?
• Who were the major players and their roles?
• What “red flags” were there for analysts, auditors,
and others to observe?
• What accounting and auditing issues arose within the
company?
• How did the Enron scandal impact the accounting
profession?
• What did we learn from Enron?
Activities
• View the movie “The Smartest Guys in the Room.”
• View the movie “The Crooked E: The Unshredded Truth about
Enron.”
• Read the book “The Smartest Guys in the Room.”
• Read the book “Anatomy of Greed.”
• Research the financial statements of Enron from 1995-2002
• Create a timeline of the major events related to Enron from
1995-2002
• Create a list of the major players and their roles in the Enron
scandal and collapse.
• Identify the “red flags” of fraud that were evident within the
Enron organization, culture, structure, and environment.
Enron Portfolio
• Major events timeline
• List of major players and roles
• Financial statement analysis and summary
• “Red Flags” paper
• Impact on the accounting profession paper
▫ Role of Arthur Andersen
• “What Did We Learn?” paper (personal
reflection)
• Enron Quiz Questions
Accounting and Auditing Issues and
Concepts (Cont.)

• Accounting
▫ Mark-to market
▫ SPEs (off-balance sheet financing)
▫ Impact on the profession
▫ Government intervention
Accounting and Auditing Issues and
Concepts (Cont.)
• Auditing
▫ Impact on the profession
▫ Collapse of Arthur Andersen
▫ Sarbanes- Oxley
▫ PCAOB
▫ Ethics
 Accounting firm
 Client
▫ Legal Liability
▫ Social Responsibility
▫ Evidence and documentation
Accounting and Auditing Issues and
Concepts (Cont.)
• Auditing
▫ Social Responsibility
▫ Evidence and documentation
▫ Audit Planning
 Understanding the client – corporate culture
 Understanding the industry/market
 Risk assessment
 Fraud risk factors
▫ Internal Control
▫ Reporting Issues
Current Status
• Enron
▫ Legal issues and court cases
▫ Former executives
▫ Employees
• Arthur Andersen
Resources
• “The Smartest Guys in the Room” – DVD (video)
• The Smartest Guys in the Room: The Amazing Rise
and the Scandalous Fall of Enron– Book (McLean
and Elkind)
• “The Crooked E: The Unshredded Truth about
Enron” – DVD (video)
• Anatomy of Greed – Book (Cruver)
• SAS 99: Consideration of Fraud in a Financial
Statement Audit
• Other articles, presentations, literature, etc.