.Two major events happened in mid-January, namely, China's Olympic bid was successful, and the right to host the Summer Olympics in 2008. Another thing is that the American Enron Company revealed that it was a fake and ugly

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Enron is an American energy tycoon with a natural gas delivery network across the United States and Canada. The company is headquartered in the Bush family's nest, Houston, Texas.

Anron has always been covered with layers of golden halo. As the world's largest energy dealer, the company's operating business covers 40 countries and regions, with a total of more than 20,000 employees and assets of up to US$62 billion. The company controls 20% of the US electricity and natural gas transactions, including energy wholesale and retail, broadband, energy transportation and finance.

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Last year, Fortune Magazine ranked seventh in the United States, and was named the most innovative company in the United States by the magazine for six consecutive years. Enron is a high-performance stock that is highly recommended by all securities rating agencies. The stock price is as high as more than 70 US dollars, and it is still on the rise, becoming the target of many investors. Moreover, due to its close relationship with the Bush administration, the company's performance has risen even more.

However, in the second quarter, Enron's financial report released attracted widespread attention from investors, media and management.

Because Enron, which had a surplus growth for twenty-one consecutive months, suddenly announced a loss of $600 million in the second quarter, it was this report that opened the prelude to the Enron incident.

Under strong pressure from government regulatory authorities, media and markets, Enron submitted documents to the US Securities and Exchange Commission to admit that there was financial fraud. From 1997 to this year, he had falsely reported more than $500 million in profits and did not put huge debts into accounts.

After the financial fraud of Enron Company was exposed, it was severely criticized by the media. Its stock was sold by investors, and its stock price fell all the way, and its market value fell from more than 80 billion US dollars at its peak to less than 200 million US dollars.

The disclosure of Enron's fraud incident caused great shock in the US government and opposition. The case involved a large number of government officials and congressmen, and would also cause teachers, firefighters and some government employees to lose more than one billion dollars in retirement funds. What's even more terrifying is that the Enron incident fundamentally shakes the beliefs of American investors.

As soon as Wall Street stock market falls, investors' investment assets in the US stock market shrank by $25,000,000, which is equivalent to a quarter of the US's that year.

The decline in the US stock market has also affected global stock markets. Major European stock markets and stock markets such as Tokyo, Hong Kong, Singapore, and Australia have also fallen sharply. The US dollar continues to depreciate, bond markets are also turbulent, and gold prices are rising all the way.

The Enron incident also caused a series of chain reactions of corporate bankruptcy, and large companies such as Xerox also reported financial violations. At the same time, American companies also caused a series of bankruptcy storms. The second largest retailer in the United States, Kmart, the United States Global Telecom, and the sixth largest cable TV company in the United States successively announced bankruptcy protection. The second largest long-distance telephone company in the United States, and World Communications Corporation, has created the latest record of bankruptcy with $1,07 billion in assets.

This series of bankruptcies further hit the US financial market. It is such a business**, which is regarded as a classic teaching case by all business school courses, collapsed in just three months. So what exactly caused Enron to be closed? Why did the Enron incident cause such a big shock in American society?

The Enron incident is actually a huge business scandal involving US politics and economy, government officials, and senior corporate officials. The most important problem is the company's financial fraud.

There are several ways of financial fraud in listed companies. The most common one is to conceal debts through affiliated companies and branches. In the United States, you only need to own only 50% of a company's shares, even if you are the actual controlling shareholder. You don't need to record the company's debts in your own company. Since the mid-1990s, Enron has established a complex corporate system through capital restructuring. The number of its various subsidiaries and partnership companies exceeds 3,000, forming a typical pyramid-like affiliated enterprise group.

Enron Company forces these affiliated companies at the bottom of the pyramid to borrow debts for top-level capital reserves. These liabilities cannot be reflected in the financial statements of the head office, but their profits can be reflected in the financial statements of the head office. This will make the company's returns continue to increase on the books.

Moreover, since American law stipulates that enterprises with different organizational forms bear different taxes, general sole proprietorships, partnerships, and limited liability companies only pay individual property and income tax by their shareholders, and do not have to pay corporate income tax. Enron Company uses this to change the holding company to a limited liability company, evading high taxes.

In addition, Enron also used self-transactions to cheat, using the income from selling assets as business income and fabricating profits. Most of the assets sold were carried out in affiliated companies, and the price was significantly higher than the normal market price. In the 12th quarter, Enron only bought a factory from Enron for 200 million US dollars. This transaction caused great controversy in Wall Street and the investment community, because no one asked for this factory two years ago, and it actually sold it to another company at such a high price. However, this transaction caused Enron's profit per share to increase sharply, causing a significant increase in market tracking.

In order to increase the investment of shareholders, Enron Company has also continuously created concepts to make investors believe that the company has entered a high-growth and high-profit field, and will record the future period returns that may be brought to the company into the current period's returns. However, its uncertainty has not been disclosed, which has seriously misled investors.

As things go to this point, some people may ask, what are the regulators of the US government doing? Why can't the problem be discovered in a timely manner?

In fact, the United States is one of the most market economy countries in the world. The essence of the market economy is a contract economy, a credit economy, and a market economy based on this credit-based one.

Major American companies generally rely on accounting firms and other credibility-level institutions and investment banks to conduct evaluation and audit. The government is very confident about this market supervision system, so it rarely intervenes.

When Enran fraud scandal died, people first guessed whether Andersen, a famous accounting firm responsible for Enran's audit, had any ulterior motives with Enran.

In fact, it was Anderson's illegal operation that helped Enron falsely report profits, conceal huge debts, and mislead investors to invest.

In fact, since the 1980s, Anderson was responsible for the audit of Enron, while also providing accounting and consulting services. Last year, Anderson received $52 million in consulting services from Enron. It can be seen that Anderson and Enron have a long-standing material interest relationship.

Because he was afraid of offending these big customers, Anderson turned a blind eye to Anran's fraud, and took into account the huge consulting income, so he naturally had a side view in financial auditing.

The collapse of Enron Company is not just a company's downfall, it is a system collapse, this. The system is not due to backwardness and incompleteness, but due to **.

In fact, some people have long expressed doubts about Enron's profit model. They pointed out that although Enron's business looks brilliant, they actually can't make much money. However, because Enron has close contacts with the US government, the procuratorate dare not act rashly.

Until May this year, an insider finally discovered the huge financial problems of Enron Company. This "person is Enron Vice President Sharon Watkins, who wrote a seven-page memorandum to Enron before Kenneth to state the company's crisis. However, this memorandum did not receive the attention of Kenneth because this man himself participated in the company's deception.

When the Enran incident ended, the US federal administration, legislative and judicial institutions immediately initiated emergency procedures to respond to the crisis, and made necessary supplements and modifications to the original laws around how to effectively ensure the authenticity and fairness of financial reports of listed companies.

Although Enron's arrival in Taiwan affects the US market, it has also had a certain impact on domestic companies. Some domestic companies have planned to go public in the United States. At this time, due to the high cost of execution in the process of implementing internal control of financial reports, a considerable number of domestic companies that are willing to raise funds in the United States postponed their listing in the United States or eventually chose capital markets in other regions for financing. For example, Air China shares decided to modify the location of the first place from the original Hong Kong and the United States to Hong Kong and the United Kingdom due to the strict regulations in the bill. The Bank of China and China Construction Bank, which were originally planned to list in New York, eventually gave up the US market.

Regarding the Enron Company incident, Fan Wubing also talked about this issue in the company's senior video conference. He clearly pointed out that due to the Enron Company incident, the world economy has entered a new development period. With the fall of a large number of old-fashioned enterprises, countless new companies have stood up.

"In this new era, we should think about what model the company should use to develop so that it will not repeat the same mistakes?" Fan Wubing put forward his requests for many executives at the meeting.

But it is obvious that due to the collapse of Enron Company, many economic textbooks have become unsuitable for this era. Although many executives have been trained very professionally, they are also confused at this time.
Chapter completed!