It is commonly know that the ever increasing number of frauds has lessened the trustworthiness of financial reports, destroyed the confidence of investors with respect to the reliability of financial reports and has also contributed to some economic losses. Corporate financial scandals are becoming more frequent and complex. One of the most famous corporate financial scandals is that of Enron. Enron has been acknowledged to be one of the largest bankruptcy and biggest audit failure in US history.
Enron was an American energy company located in Texas. It was established in 1985 by Kenneth Lay when he merged two companies called Houston Natural Gas and Internorth together to form Enron. Enron was a very successful company when it began. It became the largest seller of natural gas in North America in 1992 and owned a wide variety of assets such as gas pipelines, electricity plants, water plants and broadband services around the world. During its time of operation, Enron achieved a share price of US$90.75. In 2000, Enron was rated the…show more content… This position was taken over by founder of the organisation, Kenneth Lay. Mr Lay soon received an anonymous letter, written by the vice president of Enron, Sherron Watkins. The letter expressed her concerns over the firm’s financial accounts. Sherron Watkins also spoke with James Hecker, an audit partner at the Anderson accountancy firm, about her concerns. Hecker immediately contacted the Enron audit team. It was clear to see that Hecker was highly involved with the financial scandal, as shortly after his contact with Sherron Watkins in October an Andersen lawyer made contact with a senior member of staff at Enron. This contact was “to remind him that the company policy was not to retain documents that were no longer needed” (Palepu and Healy, 2003.). This subsequently led to the immediate shredding of important and incriminating