The Enron Scandal
Former CEO Jeff Skillings and former Chairman Ken Lay found guilty in Enron Scandal.
http://www.businesspundit.com/12-of-the-most-infamous-bankruptcies/.
The Enron scandal in the 1990s to early 2000s is one of the most well known events in the accounting world, and possibly the business world as well. Enron was a major energy company and Arthur Andersen was one of the largest accounting firms in the nation. Enron began manipulating the financial statements in order to hide debt. Andersen audited Enron, and felt pressured to let the errors slide. Andersen did not want to lose a major client, so the companies created an alliance that was founded on cheats and lies. Auditors were hired to make Enron look like a successful company in the eyes of the public. This is referred to as "cooking the books". Eventually, Enron was investigated and years of fraud were uncovered. The public lost money, many Enron employees were sent to prison, and Arthur Andersen was forced to close. The role of the auditor was suddenly at stake. Auditors were supposed to protect the public from this exact situation. From that point on, accounting firms and auditors were under close scrutiny and had to regain their trust in the public eye.
The Enron Scandal is typically referred to as the poster child for business scandals and bankruptcies. This example shows how important the auditor is to a company, and the consequences that result from a dishonest relationship. Because of what happened with Enron, accounting standards have been updated to ensure that another Enron does not occur. The accounting profession lost a lot of credibility through this situation, and it was a learning experience for the other large accounting firms.
The Enron Scandal is typically referred to as the poster child for business scandals and bankruptcies. This example shows how important the auditor is to a company, and the consequences that result from a dishonest relationship. Because of what happened with Enron, accounting standards have been updated to ensure that another Enron does not occur. The accounting profession lost a lot of credibility through this situation, and it was a learning experience for the other large accounting firms.