Is this generally correct?
How do you mean?
Erm, sort of. I'd basically strike off that first part actually, at least change to to eliminate the "but defendable". IMO there really is no defending it.
What basically happened was Enron was...erm...aggressively applying accounting law (never, EVER trust someone aggressively applying the law) in ways that were unethical at best. The best well-known of the shit they got up to involved revenue recognition. If Enron built something, say a power planet, that was expected to have X revenue over its 20 year life what is supposed to happen is that money is only recognized when it actually comes in. Say you think it will make $100,000,000 over that 20 years, but it only makes $2,000,000 in that first year, you only recognize the $2,000,000. You might add a footnote about expected useful life and all that stuff, but none of that matters. What Enron actually did was to recongize that entire hundred million dollars in the first year. You can probably already see part of the issue here. You only get $2,000,000 in, but you are saying you have it all now. But that's not the problem (well not entirely), no the bigger problem (from the perspective of Enron anyway) is that the next year they have...say 5,000,000 in revenue from it. Revenue that has already been recorded. So you can't put it down again, because that's definitely something someone will notice. So you have to keep doing this kind of crap until it balloons completely out of control. Eventually you are going to simply start running out of projects to claim revenue on, and then your fake stock price collapses.
Even without the rest of their idiocy the whole thing was going to collapse in 5-10 years at most.
But that's where we get into the next issue with recognizign that $100,000,000 in revenue. The next year you don't make $5,000,000. You make $2,000,000 because...eh, let's say the price of electricity went down. And then the next your you make $3,000,000. The year after that $2,500,000. And then it becomes clear the $100,000,000 that has already been recognized simply isn't going to appear. So what is the Enterprising young fraudster to do? Why you make a fake corporation, shift the asset over into that, and suddenly there's no evidence you've actually lost money on the power plant. Your bottom line is intact and everything looks great. Except you have still paid for the power plant. That money is spent, and you now have even less coming in. So far from being wonderful the company has taken a HUGE loss on that deal.
Just to pick out an example, it spent hundreds of millions on high-speed internet connections in 2000, and the money made on this was approximately nothing.
Now we come to the auditor failure, or as I like to call it, "how to commit professional suicide". Arthur Anderson was not independent of Enron. At all. The firm made a LOT of money consulting with the company (I am too lazy to look up the figures, but it might have been 42% of profits). Basically every service that AA could provide was given to Enron in exchange for these fees. AA had offices IN Enron headquarters, regularly hung out with them, and many of Enron's top managers were former AA employees. Basically its something even an Intermediate student should look at and hear the alarms going off in their heads. AA constantly ignored warnings from employees about questionable practices. One employee even tried to explain exactly how the whole thing was happening, and there was absolutely no follow-up.
And then just to really rub salt in it all that evil witch managed to make it look like her boss knew little about it, and she was hailed as a hero for whistle-blowing.