The executive who first raised concerns about financial malpractice at Enron said an internal investigation into accounting procedures was "bogus".
Sherron Watkins left Enron in 2002
Testifying at the trial of Ken Lay and Jeffrey Skilling, Sherron Watkins said she first raised doubts about Enron's accounting methods in August 2001.
"Accounting just doesn't get that creative," she said, referring to structures used by Enron to hide debts.
Mr Lay and Mr Skilling deny multiple counts of fraud and conspiracy.
Ms Watkins has become a well-known figure in the US after testifying at a Congressional hearing into Enron's collapse in 2002.
Ms Watkins testified she met Mr Lay to express concerns about financial structures managed by her boss, chief financial officer Andrew Fastow.
Ms Watkins had previously sent Mr Lay an anonymous memo questioning the use of off-balance sheet financial partnerships which were then running up huge losses.
In the memo, which she read out in court, she had expressed concerns that Enron could "implode in a wave of accounting scandals".
She added: "This was not just aggressive accounting, it was fraudulent accounting. I couldn't believe we had done it."
Ms Watkins acknowledged that, following their meeting, Mr Lay had ordered an investigation into her claims and ultimately had the off-balance sheet partnerships dissolved.
However, she said the investigation was flawed, since it was carried out by the firm's own auditors, who had approved the original transactions.
Under questioning, Ms Watkins admitted that she had sold shares worth $17,000 in 2002 after learning of the firm's financial problems and that this action was improper.
Ms Watkins left Enron in 2002 and has since collaborated on a book about the firm's bankruptcy.
During 2002's Congressional hearing, it emerged that Enron had considered sacking Ms Watkins after she raised concerns about its financial position.