By time the executives got caught, the debt had caused the company to file bankruptcy, and thousands of Enron employees lost their jobs and all of their retirement savings (Jickling). Arthur Anderson, Enron's certified accountant, and one of the top accounting firms in the nation was also charged with obstruction of justice (giving a clean opinion to falsified financial statements), and ceased to exist after the collapse (Jickling).
The collapse of Enron raised several questions about corporate governance and caused the public to lose confidence in corporate America (Jickling). People started questioning how to trust the valuation of companies, and started believing that all corporate executives and accountants were crooked and greedy (Cernusca). This scandal brought more attention to financial fraud than ever before and ultimately it was that fear and attention that forced the SEC to increase regulations on corporate governance and financial disclosure through the implementation of the Sarbanes Oxley Act (Buckstein). .
The collapse of Enron was undoubtedly due to a mix of bad corporate ethics, lack of corporate governance, manipulated accounting guidelines, and most importantly a large conflict of interest (Jickling). Enron created Special Purpose Entities (SPE's), otherwise known as off-book partnerships, and the executives used these partnerships to hide their large amounts of debt as well as record profits by taking out large loans in the SPE's name to purchase assets and conduct business without ever reporting the liability of debt on their balance sheet (Buckstein). Investigations found that Enron had around 3,000 different SPE's that they used and were never included in their financial statements. The company would also sell their bad (not profiting or old) assets to the SPE's to get them off their balance sheet and record a gain and then would turn around and hide all their losses under the SPE's name instead of their own (Buckstein).
