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1.     Mark to market accounting-The company used the market-to-market accounting to hide their financial loses. The use of it eventually backfired them. Enron's aggressive accounting ruined their books and had caused Enron to be very confident on their forecast about the future incomes In the mid of 2001, they came to the conclusion that the cash crisis had struck them. 2.     The culture-Although Enron's compensation and performance management system was designed to retain and reward its most valuable employees, the system contributed to a dysfunctional culture that became obsessed with short-term earnings to maximize bonuses. This made Enron a competitive workplace. Because of targets, their workers only wanted to close the deal, without being liable for it. 3.     Special Purpose Entitylimited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assetss. Enron created multiple SPE as to hide their debt in those entity. When news came out, their stock price started to drop. 4.     Key PeopleJeffrey Skiling, former President, and COO and some of the other key players ,they think that they are so smart until they could manage to get away with “crime”.                             

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1.     Mark to market accounting-The company used the market-to-market accounting to hide their financial loses. The use of it eventually backfired them. Enron's aggressive accounting ruined their books and had caused Enron to be very confident on their forecast about the future incomes In the mid of 2001, they came to the conclusion that the cash crisis had struck them. 2.     The culture-Although Enron's compensation and performance management system was designed to retain and reward its most valuable employees, the system contributed to a dysfunctional culture that became obsessed with short-term earnings to maximize bonuses. This made Enron a competitive workplace. Because of targets, their workers only wanted to close the deal, without being liable for it. 3.     Special Purpose Entitylimited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assetss. Enron created multiple SPE as to hide their debt in those entity. When news came out, their stock price started to drop. 4.     Key PeopleJeffrey Skiling, former President, and COO and some of the other key players ,they think that they are so smart until they could manage to get away with “crime”.                             

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Julien Gan Shu Lyn
LIM HONG YI
LIM BAO NING
KUMARAN A/L ULAGANATHAN
Koh Cheng Keat

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Four factors that caused the downfall of Enron in 2001.

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Four factors that caused the downfall of Enron in 2001.

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Group Member:
1141327429 CHONG YEE WEN
1141327654 TAN RUI JIA
1141327385 TAN WAN TIAN
1141327380 CHIN FU HAI
1141326756 KUAN KAH SENG

1. Mark-to-market accounting

When Enron switch to mark-to-market accounting, it can gave Skilling and his company the financial reporting license to perpetuate fraud. However, the biggest problem for Enron may be cash flow differences in the long-term sales contract when they are immediately recognized. Although mark-to-market accounting can be recognition of income suddenly increases revenues and profits, but does not necessarily bring cash. Businesses cannot operate solely on taxes, and they must also generate cash.

2. Enron Culture

Enron provides the bonuses and incentives in the form of cash or stock options came in bundles, if only the employee was good enough and considered one of the moneymakers. Because of the mentality in Enron, everyone in the company was rushing to close deal as right after a closed deal, the employees will get their bonus based on the deal result. Since there were a lot of projects that being made, there no follow-ups that led to problem. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

3. Special Purpose Entity

In order to hide losses and fabricate earnings, Andrew Fastow created multiple SPEs. The internal of the SPEs showed they were not independent since they were run by Enron employees like LJM run by Andy Fastow while ChewCo was run by Kopper. Hence, they had to disclose in Enron’s financial statements depressing earnings and debt level severely.

4.   Key players of Enron

Jeffrey Skilling was the one responsible in implementing mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which is also one of the reasons that sent the company to bankruptcy.

Andrew Fastow was the CFO of Enron who was the mastermind of the SPEs in Enron. He made the complex financial structures so that Enron could hide their losses and debts.

Rebecca Mark was the head of the failed businesses of Enron, which were Enron International and Azurix. Some of her projects were the $3 billion power plant in Dabhol, India and the expensive acquisition of Wessex Water. She also used the Enron Jet with her trips around the world. One executive even mentioned that whenever Mark attends a meeting, it costs the company at least $60,000 which would just cover her transportation.

Kenneth Lay, the Chairman and CEO of Enron, was staying away from the business and busy socializing. He and his family also misused the company assets. At one point, they were all using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.

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Four factors that caused the down fall of Enron in 2001

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Four factors that caused the down fall of Enron in 2001

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GO JIA WEI      1141326545
LEE KAR MUN     1141326771
CHEONG SIN YEE    1141327671
1.Culture
-can be considered as moneymaker. It is because regardless the result of the deal, the committees can receive their bonuses/incentives once they closed deal.
-ineffective performance review. If good review, committee got awesome bonus, otherwise that particular committee will lose his job. With this, committees become aggressive and creating high competitive among committees.
2. Market-to-market accounting
-overestimate the future profits and corrupted Enron's books
3.The use of special purpose entities
-In order to hide losses and fabricate earning, SPEs are created. As a result, it leads to drop in stock price
4. Key player in Enron
(a) Jeffrey Skilling
-unable to cover the capital cost of transaction
(b) Andrew Fastow
-made the complicated financial structures
(c) Rebecca Mark
-use Enron's asset for self-interest such as Enron Jet and cover her own transportation
(d)Kenneth Lay
-involved in conspiracy and fraud
-misuse company asset
-too busy socializing as a result straying away from business.

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Four Factors that caused the downfall of Enron in 2001. 

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Four Factors that caused the downfall of Enron in 2001. 

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Harinanthaaney(1141326527)
Harvindan
Mon(1121117588)
Piriyathashini(1141327554)
Nur Aisyah(1141327248)
Noor Amiera(1141327236)

1.Poor Corporate Governance
-Board of Directors permitted poor business decisions and unethical behaviour of top managers to go uncheched.
-Audit and compliance committee failed to assure correctness of financial statement.

2.Compensation and Reward system
-Rank and Yank system
-Compensation was largerly inform of stocks. This led to incentivizing employees to artificially inflate stock prices.

3. Corporate Culture
-Aggressive competition to delivar results.
-High risk taking was appreciated.
- Money symbolized success.

4. Inadequate Ethics Infrastructure
-Board occasionally voted to suspend code of ethics to allow for off-the-book partnerships.
-There were conflict of internet at many managerial positions within the company.The ethics Committee did nothing to address those.

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Arvin Anderson, Arvind Sabapathy, Syazana, Fareez, Ashvin

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Arvin Anderson, Arvind Sabapathy, Syazana, Fareez, Ashvin

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1.     Mark to market accounting

-The company used the market-to-market accounting to hide their financial loses. The use of it eventually backfired them. Enron's aggressive accounting ruined their books and had caused Enron to be very confident on their forecast about the future incomes In the mid of 2001, they came to the conclusion that the cash crisis had struck them.

2.     The culture

-Although Enron's compensation and performance management system was designed to retain and reward its most valuable employees, the system contributed to a dysfunctional culture that became obsessed with short-term earnings to maximize bonuses. This made Enron a competitive workplace. Because of targets, their workers only wanted to close the deal, without being liable for it.

3.     Special Purpose Entity

limited partnerships or companies created to fulfill a temporary or specific purpose to fund or manage risks associated with specific assetss. Enron created multiple SPE as to hide their debt in those entity. When news came out, their stock price started to drop.

4.     Key People

Jeffrey Skiling, former President, and COO and some of the other key players ,they think that they are so smart until they could manage to get away with “crime”.

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The first factor that cause Enron collapse is Mark-to-market accounting. Enron use Mart-to-market to hide its financial loses. For an example, Enron build a power plant and immediately claim projected profit from its books, and if the plant’s revenue is lower than what Enron has projected, it will transferred to off the books corporation, and made the company more profitable than it really was. Enron believe the mark-to-market method allowed to help them to hide out losses without hurting its company line.

The second factor that cause Enron collapse is its culture. Enron’s bonuses and incentive in form of cash and stock optios came in bundles. This makes why Enron is a very competitive workplace. And due to hitting targets, its employees just only wanted to close the deal, only, without responsible for it after that.

The third factor that cause Enron collapse is Special Purpose Entity (SPE). Enron created multiple SPE as to hide their debt in those entity. When news about debt hiding surfaced, Enron’s stock began to fall and several SPEs began to collapse as a result of the drop of Enron’s stock price.

The forth factor that cause Enron collapse are the key people. They think that they are so smart until they could manage to get away with “crime”.

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Group membersAishatul Afiqah binti Md Awang (1131122054)Nurul Ayu binti Baharum (1111115158)Menagah D/O Segaran (1111115112)Divyadarshni D/O Kanan (1141124019)Weyne Goh Chen Han (1132700988) 1) Mark-to-market Accounting In the middle of 2001, cash crisis had stuck them. Therefore, the use of mark-to-market accounting later backfired and the company too optimistic in its assumption about future profits. 2) The Enron Culture By giving bonuses and incentive in the form of cash made the workers mentality a very competitive work place. And no one in the wanted to be responsible of a done deal and they just wanted to close it and get their bonuses. 3) Performance Review Committee Made employees in Enron to be very aggressive because Enron had replaced cooperation with competition. High rating employees will get good bonus while low rating employees might lose their job anytime soon. This made the workers to demotivate. 4) Key Players Since Enron was housed by bright and talented employees; everyone thinks that they are so smart and smarter than others where they think that they can always get away with ‘CRIME’.

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Group membersAishatul Afiqah binti Md Awang (1131122054)Nurul Ayu binti Baharum (1111115158)Menagah D/O Segaran (1111115112)Divyadarshni D/O Kanan (1141124019)Weyne Goh Chen Han (1132700988) 1) Mark-to-market Accounting In the middle of 2001, cash crisis had stuck them. Therefore, the use of mark-to-market accounting later backfired and the company too optimistic in its assumption about future profits. 2) The Enron Culture By giving bonuses and incentive in the form of cash made the workers mentality a very competitive work place. And no one in the wanted to be responsible of a done deal and they just wanted to close it and get their bonuses. 3) Performance Review Committee Made employees in Enron to be very aggressive because Enron had replaced cooperation with competition. High rating employees will get good bonus while low rating employees might lose their job anytime soon. This made the workers to demotivate. 4) Key Players Since Enron was housed by bright and talented employees; everyone thinks that they are so smart and smarter than others where they think that they can always get away with ‘CRIME’.

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HOW HIGH THEY FLY

Coincidentally, but not inconsequentially, the U.S. economy during the 1990s was experiencing the longest bull market in its history. Enron’s corporate leadership, Lay excluded, comprised mostly young people who had never experienced an extended bear market. New investment opportunities were opening up everywhere, including markets in energy futures. Wall Street demanded double-digit growth from practically every venture, and Enron was determined to deliver.

In 1996 Skilling became Enron’s chief operating officer. He convinced Lay the gas bank model could be applied to the market for electric energy as well. Skilling and Lay traveled widely across the country, selling the concept to the heads of power companies and to energy regulators. The company became a major political player in the United States, lobbying for deregulation of electric utilities. In 1997 Enron acquired electric utility company Portland General Electric Corp. for about $2 billion. By the end of that year, Skilling had developed the division by then known as Enron Capital and Trade Resources into the nation’s largest wholesale buyer and seller of natural gas and electricity. Revenue grew to $7 billion from $2 billion, and the number of employees in the division skyrocketed to more than 2,000 from 200. Using the same concept that had been so successful with the gas bank, they were ready to create a market for anything that anyone was willing to trade: futures contracts in coal, paper, steel, water and even weather.

Perhaps Enron’s most exciting development in the eyes of the financial world was the creation of Enron Online (EOL) in October 1999. EOL, an electronic commodities trading Web site, was significant for at least two reasons. First, Enron was a counterparty to every transaction conducted on the platform. Traders received extremely valuable information regarding the “long” and “short” parties to each trade as well as the products’ prices in real-time. Second, given that Enron was either a buyer or a seller in every transaction, credit risk management was crucial and Enron’s credit was the cornerstone that gave the energy community the confidence that EOL provided a safe transaction environment. EOL became an overnight success, handling $335 billion in online commodity trades in 2000.

The world of technology opened up the Internet, and the IPO market for technology and broadband communications companies started to take off. In January 2000 Enron announced an ambitious plan to build a high-speed broadband telecommunications network and to trade network capacity, or bandwidth, in the same way it traded electricity or natural gas. In July of that year Enron and Blockbuster announced a deal to provide video on demand to customers throughout the world via high-speed Internet lines. As Enron poured hundreds of millions into broadband with very little return, Wall Street rewarded the strategy with as much as $40 on the stock price—a factor that would have to be discounted later when the broadband bubble burst. In August 2000 Enron’s stock hit an all-time high of $90.56, and the company was being touted by Fortune and other business publications as one of the most admired and innovative companies in the world.

THE ROLE OF MARK-TO-MARKET ACCOUNTING

Enron incorporated “mark-to-market accounting” for the energy trading business in the mid-1990s and used it on an unprecedented scale for its trading transactions. Under mark-to-market rules, whenever companies have outstanding energy-related or other derivative contracts (either assets or liabilities) on their balance sheets at the end of a particular quarter, they must adjust them to fair market value, booking unrealized gains or losses to the income statement of the period. A difficulty with application of these rules in accounting for long-term futures contracts in commodities such as gas is that there are often no quoted prices upon which to base valuations. Companies having these types of derivative instruments are free to develop and use discretionary valuation models based on their own assumptions and methods.

The Financial Accounting Standards Board’s (FASB) emerging issues task force has debated the subject of how to value and disclose energy-related contracts for several years. It has been able to conclude only that a one-size-fits-all approach will not work and that to require companies to disclose all of the assumptions and estimates underlying earnings would produce disclosures that were so voluminous they would be of little value. For a company such as Enron, under continuous pressure to beat earnings estimates, it is possible that valuation estimates might have considerably overstated earnings. Furthermore, unrealized trading gains accounted for slightly more than half of the company’s $1.41 billion reported pretax profit for 2000 and about one-third of its reported pretax profit for 1999.

CAPITALISM AT WORK

In the latter part of the 1990s, companies such as Dynegy, Duke Energy, El Paso and Williams began following Enron’s lead. Enron’s competitive advantage, as well as its huge profit margins, had begun to erode by the end of 2000. Each new market entrant’s successes squeezed Enron’s profit margins further. It ran with increasing leverage, thus becoming more like a hedge fund than a trading company. Meanwhile, energy prices began to fall in the first quarter of 2001 and the world economy headed into a recession, thus dampening energy market volatility and reducing the opportunity for the large, rapid trading gains that had formerly made Enron so profitable. Deals, especially in the finance division, were done at a rapid pace without much regard to whether they aligned with the strategic goals of the company or whether they complied with the company’s risk management policies. As one knowledgeable Enron employee put it: “Good deal vs. bad deal? Didn’t matter. If it had a positive net present value (NPV) it could get done. Sometimes positive NPV didn’t even matter in the name of strategic significance.” Enron’s foundations were developing cracks and Skilling’s house of paper built on the stilts of trust had begun to crumble.

RELATED PARTIES AND COMPLEX SPECIAL PURPOSE ENTITIES

In order to satisfy Moody’s and Standard & Poor’s credit rating agencies, Enron had to make sure the company’s leverage ratios were within acceptable ranges. Fastow continually lobbied the ratings agencies to raise Enron’s credit rating, apparently to no avail. That notwithstanding, there were other ways to lower the company’s debt ratio. Reducing hard assets while earning increasing paper profits served to increase Enron’s return on assets (ROA) and reduce its debt-to-total-assets ratio, making the company more attractive to credit rating agencies and investors.

Enron, like many other companies, used “special purpose entities” (SPEs) to access capital or hedge risk. By using SPEs such as limited partnerships with outside parties, a company is permitted to increase leverage and ROA without having to report debt on its balance sheet. The company contributes hard assets and related debt to an SPE in exchange for an interest. The SPE then borrows large sums of money from a financial institution to purchase assets or conduct other business without the debt or assets showing up on the company’s financial statements. The company can also sell leveraged assets to the SPE and book a profit. To avoid classification of the SPE as a subsidiary (thereby forcing the entity to include the SPE’s financial position and results of operations in its financial statements), FASB guidelines require that only 3% of the SPE be owned by an outside investor.

Under Fastow’s leadership, Enron took the use of SPEs to new heights of complexity and sophistication, capitalizing them with not only a variety of hard assets and liabilities, but also extremely complex derivative financial instruments, its own restricted stock, rights to acquire its stock and related liabilities. As its financial dealings became more complicated, the company apparently also used SPEs to “park” troubled assets that were falling in value, such as certain overseas energy facilities, the broadband operation or stock in companies that had been spun off to the public. Transferring these assets to SPEs meant their losses would be kept off Enron’s books. To compensate partnership investors for downside risk, Enron promised issuance of additional shares of its stock. As the value of the assets in these partnerships fell, Enron began to incur larger and larger obligations to issue its own stock later down the road. Compounding the problem toward the end was the precipitous fall in the value of Enron stock. Enron conducted business through thousands of SPEs. The most controversial of them were LJM Cayman LP and LJM2 Co-Investment LP, run by Fastow himself. From 1999 through July 2001, these entities paid Fastow more than $30 million in management fees, far more than his Enron salary, supposedly with the approval of top management and Enron’s board of directors. In turn, the LJM partnerships invested in another group of SPEs, known as the Raptor vehicles, which were designed in part to hedge an Enron investment in a bankrupt broadband company, Rhythm NetConnections. As part of the capitalization of the Raptor entities, Enron issued common stock in exchange for a note receivable of $1.2 billion. Enron increased notes receivable and shareholders’ equity to reflect this transaction, which appears to violate generally accepted accounting principles. Additionally, Enron failed to consolidate the LJM and Raptor SPEs into their financial statements when subsequent information revealed they should have been consolidated.

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The 4 factors that caused the downfall of Enron in 2001 are:

1. Mark-to-market Accounting
- The use of mark-to-market accounting later backfired. The company's aggressive accounting had corrupted Enron's books and had allowed the company to be far too optimistic in its assumptions about the future profits. Cash is a necessity for any company to run and Enron mostly had paper revenue, so by the middle of 2001, they came to the conclusion that the cash crisis had struck them.

2. Bonuses and Incentives
- In Enron, bonuses and incentives in form of cash or stock options came in bundles, only if you were good enough and if you were considered one of the moneymakers. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since there were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

- Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark means that you will get a good sum of bonus. If you were in the lowest of 5 to 6% of this rankings, that means that you are not good enough to stay in Enron and you had to pack your things as you will lose your job anytime soon.

3. Special Purpose Entity
- In order to hide losses and fabricate earning, Andrew Fastow created multiple SPEs. Some SPE's are Chewco, LJM1, LJM2 and Raptor. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price. For an SPE to legal, they have to satisfy 3 requirements, which are (1) at least 3% of the equity come from outside investors, (2) the entity could not be controlled by Enron and (3) Enron was not liable for any loan or liabilities. An internal investigation of the SPEs showed they were not independent since they were run by Enron employees. Hence, they need to disclose in Enron’s financial statements depressing earnings and debt levels severely.

4. Key Players
- Jeffrey Skilling was the one who implemented mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which also one the reasons that caused the company to bankruptcy.

- Andrew Fastow was the Chief Financial Officer of Enron who was the mastermind of the Special Purpose Entities like LJM1, LJM2, and so on in Enron. He made the complicated financial structures so that Enron could hide their losses and debts.

- Rebecca Mark was the head of the failed businesses of Enron, which were Enron International and Azurix. Some of the projects were the $3 billion power plant in Dabhol, India and the expensive acquisition of Wessex Water. She also used the Enron Jet with her trips around the world. One excutive even mentioned that whenever Mark attends a meeting, it costs the company for at least $60000.

- The Chairman and CEO of Enron, Kenneth Lay also contributed to Enron’s bankruptcy. Aside from straying away from the business because he was too busy socializing, he and his family misused the company assets. At one point, they were all using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.

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1) Mark-to market accounting
The use of mark-to market accounting had corrupted Enron's books and had allowed the company to be far too optimistic in its assumptions about the future profits and this caused them to the cash crisis.This is because the estimated income from projects were included in Enron's accounting even though the money was not yet received and the investors also were given misleading information due to the deviation in the estimations.

2) The Enron Competitive Culture
In Enron, bonuses and incentives in form of cash or stock options came in bundles, only if the employees were good enough and if they were considered one of the moneymakers. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deal (good or bad) because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since they were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

3) Special Purpose Entity
In order to hide losses and fabricate earnings of Enron, Andrew Fastow created multiple SPEs. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price.

4) Key Players
Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than others that they could always get away with " crime". For example, Enron launched EnronOnline under Jeffrey Skilling's Management and this caused Enron could not cover the capital costs of their transactions and then sent the company to bankruptcy. Besides that, Rebecca Mark was the head of the failed businesses of Enron because she used the Enron Jet with her trips around the world and whenever she attends a meeting, it costs the company at least $60,000 that would cover just her transportation. Furthermore, as the Chairman and CEO of Enron, Kenneth Lay and his family misused the company assets by using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.

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1.Mark-to-market accounting

Enron incorporated “mark-to-market accounting” for the energy trading business in the mid-1990s and used it on an unprecedented scale for its trading transactions. Under mark-to-market rules, whenever companies have outstanding energy-related or other derivative contracts (either assets or liabilities) on their balance sheets at the end of a particular quarter, they must adjust them to fair market value, booking unrealized gains or losses to the income statement of the period. A difficulty with application of these rules in accounting for long-term futures contracts in commodities such as gas is that there are often no quoted prices upon which to base valuations. Companies having these types of derivative instruments are free to develop and use discretionary valuation models based on their own assumptions and methods.

2.Unethical  Accounting Practices at Enron

Unethical accounting practices involving Enron date back to 1987. Enron’s use of creative accounting involved moving profits from one period to another to manipulate earnings. Anderson, Enron’s auditor, investigated and reported these unusual transactions to Enron’s audit committee, but failed to discuss the illegality of the acts (Girioux, 2008). Enron decided the act was immaterial and Anderson went along with their decision. At this point, the auditor’s should have reevaluated their risk assessment of Enron’s internal controls in light of how this matter was handled and the risks Enron was willing to take The history of unethical accounting practices learned early on set a precedence for what followed.
As Enron continued to expand and post record breaking earnings, Enron executives continued to use their creative accounting practices in the 1990s. As competition increased and the economy started to plunge in the early 2000s, Enron struggled to maintain their profit margins. Executives determined that in order to keep their debt ratio low, they would need to transfer debt from their balance sheet. “Reducing hard assets while earning increasing paper profits served to increase Enron’s return on assets (ROA) and reduce its debt-to-total-assets ratio, making the company more attractive to credit rating agencies and investors” (Thomas, 2002). Executives developed Structured Financing and Special Purpose Entities (SPE), which they used to transfer the majority of Enron’s debt to the SPEs. Enron also failed to appropriately disclose information regarding the related party transactions in financial statement.

3.Enron Culture

Of course, the Enron fiasco did not happen by accident. It was facilitated by a corporate culture that encouraged greed and fraud, as exemplified by the energy traders who extorted California energy consumers. Rather than focus on creating real value, management's only goal was in maintaining the appearance of value, and therefore a rising stock price. This was exacerbated by a fiercely competitive corporate culture that rewarded results at any cost. Some divisions of Enron replaced as much as 15 percent of its work force annually, leaving employees to scramble for any advantage they could find to justify their continued employment.

4.Key players

Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than the others that they think they could always get away with 'crime'.
Jeffrey Skilling was the one responsible in implementing mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which is also one of the reasons that sent the company to bankruptcy.Andrew Fastow was the Chief Financial Officer of Enron who was the mastermind of the Special Purpose Entities like LJM1, LJM2, etc. in Enron. He made the complicated financial structures so that Enron could hide their losses and debts.
Rebecca Mark was the head of the failed businesses of Enron, which were Enron International
and Azurix. Some of here projects were the $3 billion power plant in Dabhol, India and the expensive acquisition of Wessex Water. She also used the Enron Jet with her trips around the world. One executive even mentioned that whenever Mark attends a meeting, it costs the company at least $60,000 (that would cover just her transportation).
Ofcourse, who could forget the contribution of the Chairman and CEO of Enron, Kenneth Lay, regarding Enron's bankruptcy. Aside from straying away from the business because he was too busy socializing, he and his family misused the company assets. At one point, they were all using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.

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The four factors that caused the downfall of Enron in year 2001 :

(a) Mark-to-market Accounting
- In the middle of 2001, the cash crisis had stuck to Enron because cash is a necessity for any company to run and Enron mostly had paper revenue. Therefore, the use of mark-to-market accounting had been backfired later due to the company is too optimistic in it's assumptions about the future profits.

(b) The Enron Culture
- Bonuses and incentives is a form of cash or stock options that influence people to quickly done their work in a hurry tine period and they can get their bonuses regardless of the result of the deal. They just want to quickly close the deal and get their bonus, therefore, there have come out some of the problem such as there have a lot of projects that being made but no follow-ups and no anybody want to responsible on this.
- Besides that, performance review committee also is a factor that influence the downward of Enron which mean all the performance of employees are ranking by the committee.
(c) Special Purpose Entity
- Andrew Fastow created the multiple SPEs such as Chewco, LJM1, LJM2 and Raptor in order to hide loss and fabricate earning. Enron's stock is began downward and some of the SPEs began to collapse as the result of the drop of Enron's stock price when the news about the debt hiding surfaced. They also not independent because the SPEs are run by Enron employees which declared by Internal Investigation of the SPEs. Therefore, they had to disclose the Enron's financial statement.
(d) Key Players
- The talented employees in Enron are giving good impression to public that everybody think they are not involve in "crime" activities.
- Jeffrey Skilling is one responsible in implementing mark-to-market accounting in Enron and he make the company to bankruptcy is because he could not cover the capital costs of their transactions when he launched Enron online.
- Andrew Fastow is the Chief Financial Officer and he hide the losses and debts of Special Purpose Entities when he made the complicated financial statement.
- Kenneth Lay is too busy with socializing and he and his family also misused the company jets for personal travel. In order to hide the downfall of Enron, he also involved in conspiracy and fraud in the company.

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The FOUR factors that caused the downfall of Enron in year 2001:
1) Mark-to-market Accounting
Aggressive accounting of the company allowed them to be too optimistic in assume their future profit. They record cash that haven't been received in the account by using the method of Mark-to-market Accounting. Thus, they faced cash crisis in the middle 2001.

2) The Enron Culture
The competitive workplace of Enron cause everyone fight for bonuses, incentives by ignoring to view the result of the deals. Performance review committee of Enron replaced the culture of cooperation into competition.

3. Special Purpose Entity
In order to hide loss and overstate earninds, the chairman of Enron created multiple SPEs.
This cause Enron stock price to drop.

4) Key Players
The talented employees of Enron such as Jeffrey Skilling, Andrew Fastow and the chairman Kenneth Lay

were over confidence by thinking that they could always get away with ‘crime'.

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The FOUR factors that caused the downfall of Enron in year 2001:

1) Mark-to-market Accounting
The company aggressive accounting had lead company too optimistic in it's future profit which then caused them in cash crisis. The company used the mark-to-market method while preparing their accounts which means Enron can record the money which not yet been received. This was the crucial error which struck Enron down.

2) The Enron Culture
Enron had competitive workplace culture since everyone was attracted by the bonuses, incentives regardless of the result of the deals. The irresponsible attitude had shown there is no cooperation between employees.

3) Special Purpose Entity
Enron's chief of financial had created multiple SPEs in order to hide the losses and fabricate earnings.

4) Key Players
They are too much talented employees who have self-impression. They have over confident on their working skills will not involve with 'crime'. Jeffery Skilling, Andrew Fastow, Rebecca Mark and also the chairman of Enron, Kenneth Lay did not practice their ethical skills while working in Enron and the chairman even misuse the company asset for self benefits. .

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Four Factors that cause the downfall of Enron in the year 2001:

1) Mark-to-market Accounting
- The company accounting were too aggressive as the company allowed too optimistic in it's assumptions about future profits. When income is high, Enron overstate the income and keep as reserve to use it when the income is low. The Mark-to-market method means Enron can record profit which has yet to received.

2) The Enron Culture
- Extremely competitive culture were practice by the Enron's employees. The bonuses, incentives comes in form of cash or stock options in a bundle. As a result, no cooperation between employees.

3) Special Purpose Entity
-  Multiple SPEs were created by the chairman to hide losses and fabricate earnings

4) Key Players
- The chairman and CEO of Enron have the biggest responsibility on the Enron's bankruptcy.
There are talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay who gave a good impression to public that they will not involve in crime or conduct unethical practice.

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The four factors that caused the downfall of Enron in 2001:

1) Mark-to-market Accounting:
Enron was the first non-financial company to use the mark-to-market method. This means that the Enron can record the money that was not yet received and the investors are misled.

2) The Enron Culture:
Employees of Enron is more aggressive towards competition than cooperation. Therefore, there is no cooperation in the company.

3) Special Purpose Entity:
the chairman hide the losses and fabricate earnings by creating multiple SPEs.

4) Key Players:
The employees in the company thinks they are so smart that they could always get away with 'crime'. Jeffrey Skilling, Andrew Fastow, Rebecca Mark and Kenneth Lay (Chairman) did no work ethically in the company. They even use company asset (jet) to travel around world personally.

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The Four that caused the downfall of Enron in 2001:

1)Mark to market accounting
Aggressive accounting  had corrupted Enron's books and allowed the company to be far optimistic in its assumptions about the future profits. The decreasing of paper revenue make the cash crisis. Cash is a necessity for any company to run and Enron mostly had paper revenue, so by the middle of 2001, they came to the conclusion that the cash crisis had struck them.
2) The Enron Culture

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3) Special Purpose Entity

To hide the losses and fabricate earning, Enron create multiple SPEs . These entities are controlled by the Enron’s employees such as Chewco was run by Kopper. This shows the Enron can disclose to these entities financial statements to depress earning and hide losses

4. Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

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The FOUR factors that caused the downfall of Enron in 2001:

1.) Employees at Enron were partially paid in stocks which motivated the workers to take actions that were unethical in order to raise the stock price and equivalently their own money.

2.) The Enron Culture

Enron’s workplace culture is very competitive.  The incentive and the bonuses is  their aim without follow up the done deal. Enron create the culture that the worker always needs to focus in high performance. No one want to responsible of a done deal, they just wanted to close and get bonuses.  Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3) Special purpose entity:
In order to hide losses and fabricate earnings, multiple SPEs were created. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price.

4) Mark-to-market accounting: The company's aggressive accounting had corrupted Enron's books and allowed the company to be far too optimistic in its assumptions about the future profits. This made Enron look financially healthy when it actually was bleeding. Misleading information was given to the investors due to the accounting system, which eventually lead to decreasing stock price when the information about this started to surface. Cash is necessity for any company to run and Enron mostly had paper revenue so by the middle of year 2001, they came to the conclusion that the cash crisis had struck them.

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FOUR (4)  factors that caused the downfall of Enron in 2001

1) The Enron Culture

Enron’s workplace culture is very competitive.  The incentive and the bonuses is  their aim without follow up the done deal. Enron create the culture that the worker always needs to focus in high performance. No one want to responsible of a done deal, they just wanted to close and get bonuses.  Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

2) Mark-to-market accounting

The company's aggressive accounting had corrupted Enron's books and allowed the company to be far too optimistic in its assumptions about the future profits. This made Enron look financially healthy when it actually was bleeding. Misleading information was given to the investors due to the accounting system, which eventually lead to decreasing stock price when the information about this started to surface. Cash is necessity for any company to run and Enron mostly had paper revenue so by the middle of year 2001, they came to the conclusion that the cash crisis had struck them.

3) Special purpose entities
are legal entities that created only to carry out a special task. In Enron’s case, the SPE were not only used to dodge the traditional accounting conventions but also they could hide their company’s losses and fabricate earning. When the news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs was collapsed as a result of the collapse of Enron Company.
4)  Paid in stocks

Employees at Enron were partially paid in stocks which motivated the workers to take actions that were unethical in order to raise the stock price and equivalently their own money.

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The 4 factors that caused the downfall of Enron in 2001 are:
1) Employees at Enron were partially paid in stocks which motivated the workers to take actions that were unethical in order to raise the stock price and equivalently their own money.
2) Enron culture was heavily influenced by by competition and since the employees are motivated by fat bonuses and scared of getting laid off if they did not perform well and in effect resulted to an unhealthy competition between co-workers.
3) Special purpose entity: In order to hide losses and fabricate earnings, multiple SPEs were created. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price.
4) Mark-to-market accounting: The company's aggressive accounting had corrupted Enron's books and allowed the company to be far too optimistic in its assumptions about the future profits. This made Enron look financially healthy when it actually was bleeding. Misleading information was given to the investors due to the accounting system, which eventually lead to decreasing stock price when the information about this started to surface. Cash is necessity for any company to run and Enron mostly had paper revenue so by the middle of year 2001, they came to the conclusion that the cash crisis had struck them.

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FOUR (4)  factors that caused the downfall of Enron in 2001
1)  Implementing market-to market accounting by Jeffery Skilling that makes Enron had high bankruptcy because Enron couldn't cover the capital costs of transactions.

2) Used complicated financial structures to hide Enron's Loss and debts  through the Special Purpose Entities such as LJM1, LJM2 and etc.  The mastermind of SPE was CFO of Enron Andrew Fastow.

3) Abused of power in term of company's liquidity. Rebecca Mark  had expensive acquisition of Wessex Water.

4) Misused  of the company assets for instance CEO of the company Kenneth Lay had misused of the company jets for personal travels and he always away from the business because of socializing.

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1)Mark-to-market Accounting

In the middle of 2001, cash crisis had stuck them. Therefore, the use of mark-to-market accounting later backfired and the company too optimistic in its assumption about future profits.

2) The Enron Culture
By giving bonuses and incentive in the form of cash made the workers mentality a very competitive work place. And no one in the wanted to be responsible of a done deal and they just wanted to close it and get their bonuses.

3) Performance Review Committee
Made employees in Enron to be very aggressive because Enron had replaced cooperation with competition. High rating employees will get good bonus while low rating employees might lose their job anytime soon. This made the workers to demotivate.

4) Key Players
Since Enron was housed by bright and talented employees, everyone thinks that they are so smart and smarter than others where they think that they can always get away with ‘CRIME’.

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1. Mark to Market Accounting
Aggressive accounting had corrupted Enron's books and allowed the company to be far optimistic in its assumotions about the future profits. The decreasing of paper revenue make the cash crisis

2. Culture of the Enron Company

In Enron, bonuses and incentives for their employees came in bundles. Which mean that the employee’s bonuses and incentives is based on their performances. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. At the end, the company was collapse because no one wanted to be responsible of a done deal; they just wanted to get their bonus.

3. Special Purpose Entities

The legal entities that created only to carry out a special task. In Enron’s case, the SPE were not only used to dodge the traditional accounting conventions but also they could hide their company’s losses and fabricate earning. When the news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs was collapsed as a result of the collapse of Enron Company.

4. Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

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1) Mark-to market accounting
The use of mark-to market accounting had corrupted Enron's books and had allowed the company to be far too optimistic in its assumptions about the future profits and this caused them to the cash crisis.This is because the estimated income from projects were included in Enron's accounting even though the money was not yet received and the investors also were given misleading information due to the deviation in the estimations.

2) The Enron Competitive Culture
In Enron, bonuses and incentives in form of cash or stock options came in bundles, only if the employees were good enough and if they were considered one of the moneymakers. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deal (good or bad) because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since they were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

3) Special Purpose Entity
In order to hide losses and fabricate earnings of Enron, Andrew Fastow created multiple SPEs. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price.

4) Key Players
Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than others that they could always get away with " crime". For example, Enron launched EnronOnline under Jeffrey Skilling's Management and this caused Enron could not cover the capital costs of their transactions and then sent the company to bankruptcy. Besides that, Rebecca Mark was the head of the failed businesses of Enron because she used the Enron Jet with her trips around the world and whenever she attends a meeting, it costs the company at least $60,000 that would cover just her transportation. Furthermore, as the Chairman and CEO of Enron, Kenneth Lay and his family misused the company assets by using the company jets for personal travels. He was also involved in conspiracy and fraud in the company in order to hide its downfall.

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Four factors that caused the downfall of Enron in 2001.

I.            Enron Company used the mark-to-market accounting method. The mark-to-market method requires estimations of future incomes when a long-term contract is signed. These estimations were based on the future net value of the cash flow costs related to the contract were often hard to predict. This means that the estimated income from projects were included in Enron’s accounting even though the money was not yet received and if there were any changes it would show up in subsequent periods. Investors were given misleading information because of the deviation in the estimations. The company’s aggressive accounting had corrupted Enron’s books and too optimistic in its assumptions about the future profit. Enron mostly had paper revenue, so by the middle of 2001, the cash crisis had stuck Enron Company and leads the downfall of Enron.

II.            Culture of the Enron Company which is the bonuses and incentives for their employees came in bundles. Which mean that the employee’s bonuses and incentives is based on their performances. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. At the end, the company was collapse because no one wanted to be responsible of a done deal, they just wanted to get their bonus.

III.            Special purpose entities are legal entities that created only to carry out a special task. In Enron’s case, the SPE were not only used to dodge the traditional accounting conventions but also they could hide their company’s losses and fabricate earning. When the news about the debt hiding surfaced, Enron’s stock began to fall and several SPEs was collapsed as a result of the collapse of Enron Company.

IV.            Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than the others. One of Enron’s employee implementing the mark-to-market accounting method in Enron. At the end, the company could not cover the capital costs of their transactions which resulted the company to bankruptcy. Besides that, some of their employees and high management were misused the company assets. They were all using the company assets for personal uses. They were also involved in conspiracy and fraud in the company in order to hide its downfall.

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1) Mark-to-market accounting
Enron’ books are corrupted by using aggressive accounting and too optimistic towards company’s future profit.  Most of the revenue in Enron is in paper only and occur of cash crisis leads the fails of the company.

2) The Enron Culture

Enron’s workplace culture is very competitive.  The incentive and the bonuses is their aim without follow up the done deal. Enron create the culture that the worker always needs to focus in high performance. No one want to responsible of a done deal, they just wanted to close and get bonuses.  Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3) Special Purpose Entity

To hide the losses and fabricate earning, Enron create multiple SPEs . These entities are controlled by the Enron’s employees such as Chewco was run by Kopper. This shows the Enron can disclose to these entities financial statements to depress earning and hide losses.

4) Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

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1. Mark to market accounting
Aggressive accounting  had corrupted Enron's books and allowed the company to be far optimistic in its assumotions about the future profits. The decreasing of paper revenue make the cash crisis

2. The Enron Culture
Bonuses and incentives's culture make Enron's workplace become competitive. No one want to responsible of a done deal, they just wanted to close it to get their bonuses. So, the project is made but no follow up.

3. Special Purpose Entity
SPE created to hide losses and fabricate earnings. When news about debt hiding surfaced, stock began fall and several SPE collapse with a drop of stock price. So, they have to disclose the financial statements depressing earning and debt level severely.

4. Key Player
Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

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1. Mark to market accounting
Enron's book had corrupted by using aggressive accounting and too optimistic in it's assumptions about the future profits. Enron mostly had paper revenue, so they came to the conclusion that the cash crisis had struck them in middle of 2001..

2. The Enron Culture

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3. Special Purpose Entity

Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark means that you will get a good sum of bonus. If you were in the lowest of 5 to 6% of this rankings, that means that you are not good enough to stay in Enron and you had to pack your things as you will lose your job anytime soon.

4. Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud

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1)Mark-to-market accounting later backfired. The company's aggressive accounting had corrupted Enron's books and had allowed the company to be far too optimistic in it's assumptions about the future profits. Cash is a necessity for any company to run and Enron mostly had paper revenue, so by the middle of 2001, they came to the conclusion that the cash crisis had struck them.

2)The Enron Culture

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3)Special Purpose Entity

Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark means that you will get a good sum of bonus. If you were in the lowest of 5 to 6% of this rankings, that means that you are not good enough to stay in Enron and you had to pack your things as you will lose your job anytime soon.

4)Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud

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1) Mark-to-market accounting

Enron’ books are corrupted by using aggressive accounting and too optimistic towards company’s future profit.  Most of the revenue in Enron is in paper only, so occur of cash crisis leads the fails of the company.

2) The Enron Culture

Enron’s workplace culture is very competitive. Workers are just wants to compete but not cooperate. The incentive and the bonuses is only their aim without consider the deal or the job done. Enron create the culture that the worker always needs to focus in high performance. Company will rate the performance, the worker with high performance will get high bonuses, if not they may loss the job in anytime because is useless in Enron.

3) Special Purpose Entity

To hide the losses and fabricate earning, Enron create multiple SPEs such as Chewco, LJM01, LJM02 and Raptor. These entities are controlled by the Enron’s employees such as Chewco was run by Kopper. This shows the Enron can disclose to these entities financial statements to depress earning and hide losses.

4) Key Player

Enron has a lot of the talented employees such as Jeffery Skilling, Andrew Fastow and Kenneth Lay. They give a good impression to public that everyone thinks that they will not involve in “crime”. Jeffery Skilling is the person thinks about mark-to- market accounting, he create EnronOnline. In the end the costs cannot be cover and leads bankruptcy. The CFO, Andrew Fastow has established the special purpose entity that can hide the losses. The failure of the company also involved by the action of Kenneth Lay that too busy in socializing. He and his family misuse the company’s asset and Lay involve in conspiracy and fraud.

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1. Unduly aggressive earnings targets and management bonus compensation based on those targets

Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since there were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.

2. Excessive interest by management in maintaining stock price or earnings trend through the use of unusually aggressive accounting practices

The use of mark-to-market accounting later backfired. The company's aggressive accounting had corrupted Enron's books and had allowed the company to be far too optimistic in it's assumptions about the future profits.

3. Management setting unduly aggressive financial targets and expectations for operating personnel

Enron was housed by bright and talented employees and everyone thinks they are so smart or smarter than the others that they think they could always get away with 'crime'. Jeffrey Skilling was the one responsible in implementing mark-to-market accounting in Enron. Under his management, Enron launched EnronOnline, which is an Internet based service where contracts on energy commodities could be traded with Enron. In the end, Enron could not cover the capital costs of their transactions, which is also one of the reasons that sent the company to bankruptcy.

4. Inability to generate sufficient cash flow from operations while reporting earnings and earnings growth

Cash is a necessity for any company to run and Enron mostly had paper revenue, so by the middle of 2001, they came to the conclusion that the cash crisis had struck them. In order to hide losses and fabricate earnings, Andrew Fastow created multiple SPEs. Some SPE's are Chewco, LJM1, LJM2 and Raptor. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price

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1. The use of mark-to-market accounting later backfired. The company's aggressive accounting had corrupted Enron's books and had allowed the company to be far too optimistic in it's assumptions about the future profits. Cash is a necessity for any company to run and Enron mostly had paper revenue, so by the middle of 2001, they came to the conclusion that the cash crisis had struck them.
2.  In Enron, bonuses and incentives in form of cash or stock options came in bundles, only if you were good enough and if you were considered one of the moneymakers. This mentality made Enron a very competitive work place. Everyone was in a hurry to close deals because right after a closed deal, they got their bonuses regardless of the result of the deal. This became a problem since there were a lot of projects being made but no follow-ups. No one wanted to be responsible of a done deal, they just wanted to close it and get their bonus.
3. Performance review committee was also a factor why employees in Enron were so aggressive. It created a culture within Enron that replaced cooperation with competition. The committee gave ratings from 1 to 5, 1 being the highest and in Enron, the 1 mark means that you will get a good sum of bonus. If you were in the lowest of 5 to 6% of this rankings, that means that you are not good enough to stay in Enron and you had to pack your things as you will lose your job anytime soon.
4. In order to hide losses and fabricate earning, Andrew Fastow created multiple SPEs. Some SPE's are Chewco, LJM1, LJM2 and Raptor. When news about the debt hiding surfaced, Enron's stock began to fall and several SPEs began to collapse as a result of the drop of Enron's stock price.