QUESTION 1 (25 MARKS)

After the energy and commodities firm Enron collapsed, thousands of stockholders lost millions of dollars as Enron share values sharply declined. The company's officers and board of directors, including Chairman Kenneth Lay, CEO Jeffrey Skilling and CFO Andy Fastow, were selling their Enron stock at higher prices due to false accounting reports that made the stock seem more valuable than it truly was. Justify whether there is there an agency cost here. If so, critically analyse on how ENRON management contributed to the collapse of energy giant Enron in 2001.

Tips on how to answer the question: A critical analysis is subjective writing because it expresses the student's opinion or evaluation of a text. Analysis means to break down and study the parts: critical reading and critical writing 1) Critical Reading 2) Critical Writing (25 Marks)