Enron Scandal and Its Implications

Enron, once a leading energy company, collapsed in 2001 due to fraudulent accounting practices and mismanagement. Founded in 1985, Enron grew rapidly through deregulation and innovative strategies. However, its use of mark-to-market accounting allowed it to inflate profits, leading to financial instability. The dot-com bubble burst further strained Enron's assets, and by 2001, the company faced scrutiny over its financial statements. CEO changes and stock price drops followed, culminating in bankruptcy. Legal actions ensued, with executives facing charges and Arthur Anderson, Enron's auditor, losing its license. The scandal led to the Sarbanes-Oxley Act, imposing stricter regulations on corporate governance.

What was Enron's status at the beginning of 2001?

• A small startup

• A leading corporation with 30,000 employees

• A bankrupt company

• A government-owned entity

What significant event occurred in 1985 related to Enron?

• Enron was founded as a result of a merger

• Enron declared bankruptcy

• Enron launched its first product

• Enron was acquired by another company

Who was appointed CEO of Enron Capital and Trade in 1991?

• Arthur Anderson

• Ken Lay

• Paul Rand

• Jeffrey Skilling

What accounting method did Enron use to inflate its profits?

• Accrual accounting

• Cash accounting

• Historical cost accounting

• Mark-to-market accounting

What was the impact of the dot-com bubble burst on Enron?

• It had no impact

• It boosted Enron's profits

• It severely affected Enron's assets

• It led to Enron's acquisition

What happened to Enron's stock price by the end of November 2001?

• It increased to $100

• It remained stable

• It dropped to 26 cents

• It was delisted from the stock exchange

What was the outcome of the merger agreement with Dynergy?

• It was successfully completed

• It was called off due to transparency concerns

• It led to Enron's recovery

• It resulted in a new company formation

What was the fate of Enron's auditors, Arthur Anderson?

• They were found guilty and closed down

• They merged with another firm

• They continued auditing Enron

• They were acquitted of all charges

What regulatory act was introduced as a result of the Enron scandal?

• The Dodd-Frank Act

• The Sarbanes-Oxley Act

• The Glass-Steagall Act

• The Gramm-Leach-Bliley Act

What was the main purpose of the Sarbanes-Oxley Act?

• To provide tax benefits to corporations

• To promote mergers and acquisitions

• To oversee audit reports and enforce strict controls

• To deregulate the energy market