Question

case study
the enron scandal

1. what happened to employees who invested their retirement savings in enron?

a) they made large profits
b) they lost their savings when enron collapsed
c) they were given bonuses
d) they received government refunds

1. which of the following executives admitted to helping with the fraud?

a) andrew fastow
b) jeffrey skilling
c) kenneth lay
d) arthur andersen

1. which major consequence followed the enron scandal?

a) the company was taken over by a rival
b) a new law was passed to increase corporate transparency
c) enron received financial help from the government
d) enron’s leaders were promoted

1. what was the name of the law passed after the enron scandal to prevent corporate fraud?

a) the dodd - frank act
b) the sarbanes - oxley act
c) the corporate integrity act
d) the fair business act

1. what lesson did the world learn from the enron scandal?

a) large companies never fail
b) greed and dishonesty can have huge consequences
c) investors should always trust big corporations
d) accounting rules do not matter

Explanation:

Question 6

In the Enron scandal, when Enron collapsed due to fraud and mismanagement, employees who had invested their retirement savings in Enron lost those savings as the company's value plummeted. Option a is incorrect as they didn't make profits, c is incorrect as they weren't given bonuses, and d is incorrect as there were no government refunds for this.

Andrew Fastow, Enron's former CFO, admitted to his role in the fraud related to Enron's financial misreporting. Jeffrey Skilling and Kenneth Lay were also involved but Andrew Fastow was the one who admitted to helping with the fraud among these options (Arthur Andersen was an accounting firm, not an executive of Enron).

After the Enron scandal, the Sarbanes - Oxley Act was passed to increase corporate transparency and accountability in financial reporting. The company was not taken over by a rival (a), didn't receive government financial help (c), and Enron's leaders were not promoted (d).

Answer:

b) They lost their savings when Enron collapsed

Question 7