World Com and Enron scandals were known as the companies who perpetuated fraudulent
accounting and had major bankruptcies that affected thousands of employees and investors in the United
States. Enron was an energy-trading and utilities company based in Houston, Texas while World Com was
a telecommunications company. In 1995, Enron is named “America’s Most Innovative Company” by
Fortune and goes on to win the award for several years. In the middle of 2001, where the company was
at its peak, shares were trading at $90.75. On December 2001, the shares then plummeted to $0.26 as
Enron filed for bankruptcy with assets of about $65 billion. Before the whole fraud scheme was
discovered, many analysts were already curious on how Enron made money and that no one could explain
it.
The dominoes start to fall as circumstances became overly suspicious that on August of 2001,
Enron’s CEO, Skilling resigned. Skilling’s resignation fueled suspicion that something was wrong inside the
company. Worst, Enron collapsed, one step after another. The mark-to-market practice led to schemes
that were designed to hide the losses and make the company appear more profitable than it really was.
To cope with the liabilities of Enron, Auditor Andrew Fastow had a cautious plan to show that the company
was in sound financial shape despite the fact that many of its subsidiaries were losing money. Author
Anderson acquired 50 million dollars for his services in the company which aided Enron in a massive
financial statement fraud creating misstated financial figures and led to one of the most distressing
financial crisis known in the history of United States. Also, Enron used special purpose vehicles (SPVs), or
special purposes entities (SPEs), to hide the amount of debt and toxic assets from investors and creditors.
The fraud symptom that could have given investigators more conclusiveness existed in how sales revenues
