Enron Leadership
Enron collapsed very quickly in November 2001, and its failure should have been a warning to serious dysfunctions in the entire corporate and financial system, but this did not happen. Its executives admitted that they had falsified its records going back for at least five years, although in reality they had been doing so since the 1980s. When the company filed Chapter 11 bankruptcy it laid off over 20,000 workers and at least $24 billion in pension assets, stocks and mutual funds also vanished (McLean and Elkind 2003). In addition, the Arthur Anderson accounting firm that had been complicit in covering up the fraud and embezzlement at Enron for many years, also went out of business. This catastrophe also demonstrated that Wall Street banks, stock analysts and ratings agencies had either been deceived or allowed themselves to be deceived by Enron when they continually painted a positive picture of…...
mlaREFERENCES
Anand, S. (2011). Essentials of the Dodd-Frank Act. NY: John Wiley.
Enron -- The Smartest Guys in the Room (2005). Starring John Beard and Jim Chanos. Directed by Alex Gibney.
Gap Inc. 2007/2008 Social Responsibility Report.
http://www.socialfunds.com/shared/reports/1249942124_GapInc0708SR.pdf
Enron (Movie) analysis
The Smartest Guys in the oom-Enron
The film is pitched around the America's seventh largest corporation that was in charge of distributing electricity and natural gas. The company was worth over 70 billion dollars in assets built over years with over 22,000 employees, it became bankrupt within 24 days. The employees lost their jobs and medical insurance, 1.2 billion in retirement benefits while the retirees lost 2 billion dollars in pension funds. The company collapsed so fast in a scandal of complicated transactions and accounting practices that shocked the corporate America. Before its bankruptcy, it was viewed by many as the new business model and the future of energy and power in America, voted six consecutive years by Fortune magazine as the most innovative company in America.
The film reveals how unethical the executives were by walking away with billions of dollars and leaving investors and pensioners with nothing. The…...
mlaReferences
James Bone, (2009). Corporate compliance Insights .The conflicts of interest in Financial Services. Retrieved April6 2012 from. http://www.corporatecomplianceinsights.com/conflicts-of-interests-financial-services-enron-economy/
Kliot Jason (Producer), & Motamed Susan (Director). 2005. The Amazing Rise and Fall of Enron, Magnolia pictures. United States of America: An HDNet Films Production}.
Socialist worker, (2002). The fall of the house of Enron. Retrieved April6, 2012 from.
http://socialistworker.org/2012/01/06/fall-of-the-house-of-enron
If I was a legislator, I will be doing this act and I will not be swayed or affected by friends and lobbyists alike.
Response to Ji Woo Chai: Indeed, the Sarbanes-Oxley Act was able to put in place controls and measures to prevent the reoccurrence of the Enron scandal. However, there has to be more done because of what occurred before and during the financial crisis. Thus, there may be a need to amend the SOX Act or ratify a new law altogether.
Response to Diana Rakadzhieva1: I agree, no matter how many laws or control mechanisms are put in place, there will still be people who will try to find ways of getting away with things. The new laws and technologies will of course make it more difficult for these nefarious groups and individuals to do their misdeeds. In due time though, they will stop at nothing from engaging…...
mlaBibliography:
Lehrer, Jim. Corporate Crackdown: Enron. PBS Newshour. 2006. 29 Jul. 2011. .
THE PEOPLE EHIND THE RISE AND FALL OF ENRON
Kenneth Lay being one of the pioneers of Enron from its establishment in 1986, had lead the way of Enron's emergence as one of the leading company in the U.S. And eventually to its collapse and declaration of bankruptcy on December 2001. Kenneth Lay held the position as the CEO and chairman of Enron from 1986 to January 23, 2002. Lay is regarded directly to Enron's over all corporate history. One of the noted businessmen in Houston, Lay closely monitored the development of Enron from a startup company to billion dollar energy giant in the late 90's.
Kenneth Lay with his flaring tactics have influenced different sectors of the government in the interest of Enron which only have lead to more outrage among consumers.
Enron and its chief executive officer, Kenneth Lay, have been remarkably successful in lobbying the executive branch, leaders in Congress…...
mlaBibliography
Broughton, Philip Delves. Enron cocktail of cash, sex and fast living (2002)
Hanson, Kirk. Lessons from the Enron Scandal
SCU (2006). http://www.scu.edu/ethics/publications/ethicalperspectives/enronlessons.html
Enron Scandal: Who was Responsible and Why?
ackground of Enron Scandal and Timeline of Events
Key Players in Enron Scandal
The Enron Scandal was the biggest accounting fraud in U.S., indeed worldwide, business history. The following paper gives a brief history of the events leading up to the scandal, a timeline for the events surrounding the uncovering of the scandal and the events following the public knowledge of the scandal. Key players in the run-up to the scandal are discussed, as are the people involved in the subsequent investigations.
ackground of Enron Scandal and Timeline for Events
The collapse of energy giant Enron is the largest bankruptcy and one of the most shocking failures in United States corporate history. In a little over 15 years, Enron grew into one of the U.S.'s largest companies. It embraced new technologies, established new methods of trading in energy and seemed to be a shining example of successful corporate…...
mlaBibliography
BBC (2002a). Enron Scandal at a glance.
A www.bbc.co.uk.(Accessed 5th August 2003).
BBC (2002b). Enron directors plead innocence.
A www.bbc.co.uk.(Accessed 5th August 2003).
Enron hid most of its debts by establishing several LLPs, with some of them being secretly ran by Andrew Fastow, CFO at Enron. y counting only the gains and losses of the companies, but not having to report the LLPs on its financial sheet, Enron's financial position seemed very good. Consolidating the statements would have defeated the purpose of Fastow because the goal was to dump debt, not to report it.
This would have made Enron look less profitable. There was no need to consolidate the two statements to count the LLP loses as well as the gains because Enron executives made sure that an outside company had a three percent control of the LLPs. This was the minimum investment required to stop the reporting on the financial sheets of Enron.
The company wanted to reduce its debt to keep its investor ratings. The company could have issued more stocks, but this…...
mlaBibliography
Akhigbe, a, Madura, J., and Martin, a.D.(2005, July 1). Accounting contagion: the case of Enron. Journal of Economics and Finance 29.2: 187-202. http://www.allbusiness.com/finance/3502611-1.html
Glassman, J.K. (2002, January 18) Diversify, diversify, diversify. Wall Street Journal [New York, N.Y.] Eastern edition: A10. http://www.opinionjournal.com/editorial/feature.html?id=95001750
Hamilton, S. (2004, June 4). Enron unravelled. European Business Forum. 66-71. http://www.accessmylibrary.com/coms2/summary_0286-3847472_ITM
Supanvanij, J. (2005). Does the composition of CEO compensation influence the firm's advertising budgeting? Journal of American Academy of Business, Cambridge 117-123.
The deregulation was forced through by legislators to whom Enron paid out massive contributions..." (Levy, 2005)
The fraud was primarily comprised of "cooking the books to make it look as if the company's finances were consistently rosy, so that share prices would steadily keep rising." (Levy, 2005) More than 30 individuals have received criminal charges since 2001 connected to their dealing with Enron which incidentally "was just one of several companies revealed to have been practicing this sort of fraud..." (Levy, 2005) it is interesting that most of these companies are known to have provided hefty contributions to "politicians of every stripe, but had particularly strong links to the Republicans and to ush." (Levy, 2005)
IV. Enron is iggest Political Scandal in History
Robert ryce states in the work entitled: "Pipe Dreams: Greed, Ego and the Death of Enron" that the Enron failure "was a mind-boggling event..." And that the failure of…...
mlaBibliography
Bryce, Robert (2004) Pipe Dreams: Greed, Ego and the Death of Enron. Public Affairs, 2004.
Herivel, Tara and Wright, Paul (2003) Prison Nation: The Warehousing of America's Poor. Routledge 2003.
Levy, Joel (2005) the Little Book of Conspiracies: 50 Reasons to Be Paranoid. Thunder's Mouth Press, 2005.
Waldman, Paul (2004) Fraud; the strategy behind the Bush lies and why the media didn't tell you. Sourcebooks Inc. 2004.
Enron Case Study
Enron was a company that started out small, but through some ethically unsound decisions, grew to control a large percentage of the energy market in America. In order to expand financially, Enron's executives skirted the law, creating several "independent" companies, called "special-purpose entities" (SPEs) into which they were able to hide many bad and devalued assets. In short, the executives used Enron money to create seemingly independent companies which purchased many of Enron's bad investments, clearing them off Enron's books and making the company seem more profitable than it really was. This was because although the bad assets were no longer associated with Enron, they were still owned by companies which were owned by Enron. Enron still owned all the bad assets, they just hid them in different books than the ones they showed to the public.
One of the major causes of fraud at Enron was found to…...
mlaReferences
Albrecht, W. (2005). Business Fraud (The Enron Problem). The American Institute of Certified Public Accountants (AICPA) Retrieved from http://www.scribd.com/doc/24385256/Business-Fraud-the-Enron-Problem .
Bentson, George and Al Hartgraves. (2002). Enron: what happened and what can we learn from it." Journal of Accounting and Public Policy, 21, 105-127. Retrieved from http://bbs.cenet.org.cn/uploadimages/200311294124115529.pdf.
Brooks, Leonard and Paul Dunn. (2004). Business and Professional Ethics for Directors, Executives, and Accountants. Mason, OH: Thomson/South-Western. Retrieved from http://books.google.com/books .
Fox, Loren. (2003). Enron the Rise and Fall. Hoboken, NJ: Wiley. Retrieved from
Disregarding its Ethical Code. Enron had its own set of Ethical Code, but it became redundant because the top managers at the company hardly paid any heed to it. he corporate culture at the company was focused on making "deals" and increasing Enron's share value, while the "outdated, theoretical concept of ethics and morality" was kept on the back-burner.
Enron's 'ethics' was personified by Kenneth Lay's exercising of his stock options and pocketing profits, even as he was promoting Enron shares as a bargain to employees. It was also reflected in the action of some Enron executives who pressurized a brokerage company (UBS PaineWebber) to take action against a broker who advised some Enron workers to sell their shares. Other Enron employees, down the line, were therefore more likely to follow the example of its top executives in looking after their own interests and driving up the share value by whatever…...
mlaThe rise in Enron's stock price coincided with an unprecedented bull-run on the Wall Street
The Sarbanes-Oxley Act, a comprehensive corporate reform package, was signed into law of the United States on July 29, 2002
Enron
Enron was at one time considered to be a highly successful energy firm based out of Houston, Texas. The company was initially formed from a merger of two prominent gas pipeline companies in 1985, and the company's scope then broadened to include the provision of products and services in the realms of electricity, natural gas, and communications. Enron's reach expanded beyond the United States to the international market, as the company dealt in the management and delivery of energy services and products to customers in both commercial business and industrial sectors throughout the world. The financial success of Enron was created mostly throughout the nineties, when the CEO and CFO at that time created Enron into a company that was worth $150 billion, making it the seventh largest company on the Fortune 500.
All of this perceived success, however, was later found to be fraudulent due to questionable accounting practices, and…...
mlaReferences
Carson, T.L. (2003). Self-interest and business ethics: some lessons of the recent corporate scandals. Journal of Business Ethics, 43(4), 389-94.
Hasnas, J. (1998). The normative theories of business ethics: a guide for the perplexed. Business Ethics Quarterly, 8(1), 19-42.
Kulik, B.W. (2005). Agency theory, reasoning and culture at Enron: in search of a solution. Journal of Business Ethics, 59(4), 347-60.
Kulik, B.W., O'Fallon, M.J., Salimath, M.S. (2008). Do competitive environments lead to the rise and spread of unethical behavior? Parallels from Enron. Journal of Business Ethics, 83(4), 703-23.
Accordingly, arrogance is the only word to describe such a goof.
KPMG served as the independent audit firm of several of the largest sub-prime mortgage lenders. Identify the advantage and disadvantages of a heavy concentration of audit clients in one industry or sub-industry.
Citation: Danos, Paul. Eichenseher, John W. "Audit Industry Dynamics: Factors Affecting Changes in Client Industry Market Shares. Journal of Accounting Research." Institute of Professional Accounting. JSTOR.ORG. Vol. 20. No 2. Part II. Autumn 1982.
Full Citation (as posted in Jstor):
Audit Industry Dynamics: Factors Affecting Changes in Client-Industry Market Shares: Paul Danos and John W. Eichenseher. Journal of Accounting Research. Vol. 20, No. 2, Part II (Autumn 1982), pp. 604-616 (article consists of 13 pages). Published by: Blackwell Publishing on behalf of Accounting Research Center, Booth School of Business, University of Chicago
Stable URL:http://www.jstor.org/stable/2490888
The advantages and disadvantages of a heavy concentration of audit clients in one industry or sub-industry:
From Audit Industry…...
Enron
The answer to the first question is that the executives at Enron committed accounting fraud. The company had grown rapidly to become one of the largest firms in the United States, theoretically building a business in energy trading. Even before the scandal broke, the company did not produce accurate financial statements, if it produced them at all. The company used a number of unorthodox techniques to create its financial statements, essentially distorting the statements so that they did not accurately reflect the company's business.
The three basic things that Enron did were to create special purpose entities to hide the company's debt; recording transactions improperly to make the company's revenues appear larger than they were; and adopted unusual techniques for accounting such as the use of mark-to-market accounting for non-financial projects. These different techniques made the company's revenue look larger than they were, and made Enron's debt look smaller. This allowed…...
Take for instance their financing of political campaigns, which offered them access to political laws and regulations, made in their favour. However sponsorships of political parties are legal, the results Enron retrieved were immoral. Another dubious partnership was that with audit and accounting firm Arthur Andersen. The partnership was unethical but possible due to the lack of specific judiciary regulations and it was marked by numerous conflicts of interest.
Altering company records: Once an investigation was commenced, Enron and Andersen executives ordered the destruction of relevant and incriminating company records. This made investigators' work even more difficult and was aimed to conceal the truth form the public. These facts were proven by Enron employees and their low morality is undisputed.
ibliography
2002, What Really Went Wrong With Enron? A Culture of Evil?, Santa Clara University, Markkula Centre for Applied Ethics, http://www.scu.edu/ethics/publications/ethicalperspectives/enronpanel.html, last accessed on January 4, 2008
2002, Lessons from the Enron Scandal,…...
mlaBibliography
2002, What Really Went Wrong With Enron? A Culture of Evil?, Santa Clara University, Markkula Centre for Applied Ethics, last accessed on January 4, 2008http://www.scu.edu/ethics/publications/ethicalperspectives/enronpanel.html ,
2002, Lessons from the Enron Scandal, Santa Clara University, Markkula Centre for Applied Ethics, last accessed on January 4, 2008http://www.scu.edu/ethics/publications/ethicalperspectives/enronlessons.html ,
Enron 101, MSNBC, accessed on January 4, 2008http://msnbc.com/modules/enron/,last
Enron
Lessons from Enron
Pride goes before the fall, so they say, and there is certainly a high degree of hubris present in "the smartest guys in the room." As it is pointed out early in the film by Amanda Martin-Brock, former executive at Enron, "The fatal flaw at Enron, if there was one, you say it was pride -- and then it was arrogance, intolerance, greed." Pride, intolerance, and greed may all be seen as characteristics demonstrated by Enron boss Kenneth Lay. From the beginning, when danger signs were revealed to be emanating from Enron traders Louis Bourget and Thomas Mastroeni, Lay decided to look the other way. Not only did he look the other way, however; he actually encouraged their "gambling": "Please keep making us millions," he stated. Here it was: pride -- the belief that he could control the chaos no matter what; intolerance -- unwillingness to consider the…...
mlaWorks Cited
Gibney, Alex, dir. Enron: The Smartest Guys in the Room. LA: Magnolia Pictures,
2005. Film.
The result would mean a reduction of consulting income for AA as Enron would no longer be a customer. By whitewashing the audit, AA positioned itself to gain more lucrative consulting work from Enron.
The bounded ethicality came from a clear source. This type of relationship was common during that era, and all of the major accounting firms profited from it. Thus, there was strong incentive for auditors to compromise their ethics. This is not to say that it was stated outright that AA's auditing team should whitewashing their findings about Enron. What it means is that over the years auditing processes emerged that basically took the companies at face value, so that the audit procedure itself was not particularly rigorous. Moreover, auditing firms would be hesitant to use strong language in the wording of their report and they were in the habit of running their findings past the management…...
mlaReferences
Bazerman, M. & Tenbrunsel, A. (2011). On behavioral ethics. Harvard Magazine. Retrieved May 9, 2014 from http://harvardmagazine.com/2011/03/on-behavioral-ethics
Chugh, D., Bazerman, M. & Banaji, M. (2005). Bounded ethicality as a psychological barrier to recognizing conflict of interest. Harvard Business School. Retrieved May 9, 2014 from http://pages.stern.nyu.edu/~dchugh/articles/2005_CMU.pdf
When people think of accounting, they rarely think of ethics. While ethical guidelines are of obvious importance in other professions, they seem removed from the black and white nature of number crunching. However, accounting ethics are of incredible importance, not only to accountants but also to their clients. That is because when handling money there is tremendous pressure to fudge numbers, look the other way when other people are doing wrong, or even to dip your hand in the cookie jar. This can result in a range of disastrous results, from tax problems for....
Accounting ethics are incredibly important because accountants are entrusted with handling money for individuals, businesses, and other organizations. Unethical accountants can expose a business to financial risks and liabilities, even if their breaches of ethics do not amount to criminal behavior or involve intentional wrongdoing on the part of the accountant. Huge financial scandals, such as Enron, could not occur without ethical breaches on the part of the accountants because the financial structure of large organizations requires at least passive participation in wrongdoing by people at the accountant level. Accountant ethics are....
1. The Dark Side of Business: Unethical Practices in the Corporate World
2. The Ethics of Exploitation: Uncovering Unethical Practices in the Modern Workplace
3. Unmasking Unethical Behavior: A Closer Look at Fraud and Corruption in Business
4. Ethics vs. Profit: The Impact of Unethical Practices on Companies and Society
5. Whistleblowing on Unethical Practices: Exposing Wrongdoings for the Greater Good
6. The Slippery Slope of Unethical Behavior: How Small Transgressions Can Lead to Larger Issues
7. The Role of Ethics in the Digital Age: Addressing Unethical Practices in Technology
8. From Enron to Volkswagen: Case Studies of Unethical Practices and Their Consequences
9. Unethical Practices in Healthcare:....
One possible essay subject related to case studies for SEC (Securities and Exchange Commission) and ACC (Accounting) could be the recent scandal involving the German fintech company Wirecard. Wirecard was once touted as one of Germany's biggest success stories, but it collapsed in 2020 after it emerged that the company had been involved in a massive accounting fraud.
The scandal raised serious questions about the effectiveness of regulatory oversight by the SEC, as well as the role of auditing firms in detecting and preventing financial fraud. It also highlighted the challenges of regulating the rapidly-evolving fintech industry, which often operates in....
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