The Enron scandal, explained: how creative accounting hid a company's real financial health, and what changed after.

Originally reported as: “Energy trading giant collapses into bankruptcy amid accounting fraud allegations”

Enron, a Houston-based energy trading company that had grown into one of the largest corporations in the US by reported revenue, collapsed into bankruptcy in December 2001 after it emerged that the company had used complex off-balance-sheet arrangements and aggressive accounting techniques to hide massive debts and inflate its reported profits for years. The bankruptcy, the largest in US corporate history at the time, wiped out tens of thousands of jobs and much of the retirement savings of employees who had held large amounts of Enron stock in their pension plans. Enron's outside auditor, Arthur Andersen, was convicted of obstruction of justice for destroying documents related to the case and effectively collapsed as a firm even though the conviction was later overturned on a technicality. The scandal directly led to the Sarbanes-Oxley Act of 2002, a sweeping US law that reshaped how public companies report their finances and how auditors are required to operate.