StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

ENRON Ethical Breach - Research Paper Example

Cite this document
Summary
Running Head: Enron Ethical Breach Enron Ethical Breach Enron Ethical Breach Enron Corporation was a Houston-based American energy and services company established by Kenneth Lay in 1985. The company, which was believed to be the “most innovative company” of the United States and one of the world’s leading electricity, natural gas, communications, pulp and paper company, was formed by merging Houston Natural Gas and InterNorth…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97% of users find it useful
ENRON Ethical Breach
Read Text Preview

Extract of sample "ENRON Ethical Breach"

Download file to see previous pages

Its stocks continued to increase at a modest rate, but in 1999 – 2000, investors saw a sudden 87% increase in 2000, which coupled with the company being named the most innovating company in America, meant the future prospects for the shareholders seemed excellent. Unfortunately, it was revealed in October 2001 that this almost sudden increase in investors’ confidence was due to accounting loopholes and fraudulent auditing, which allowed the company’s shares and returns to be appearing more favorable than they actually were.

This ethical breach included the involvement and dissolution of Arthur Andersen, one of the most famous auditing firms of the world at the time. There is no reason to believe that Enron participated in corrupt practices since its inception in 1985, rather, evidence indicates that the ethical breach that lasted about a decade began several years later, when Jeffrey Skilling was hired and a team of executives was developed to cater to the accounting needs of the company. Since most of the work done by this group of individuals was either difficult to understand, or too complex to be looked into, many loopholes, special entities that otherwise would not have been allowed, and poor financial auditing allowed billions of dollars of debt to be hidden from the public eye.

Obviously, an act that is criminal for such a huge public company to carry out. This lack of “visible debt” meant the company continued to prove profitable, and confidence coupled with investment continued to increase. Studies that were done on the ethical breach carried out by the company showed that it was not the method of corruption employed by people running the company, or the auditors in charge of producing honest financial reports. Rather, it was seen as an accumulation of negligence and misleading details in reports that finally spiraled out of control, and resulted in the demise of a company that not long ago had proved to be immensely promising.

The ethical breach that has been described as one of the biggest scandals of corporate America involved misrepresentation of financial statements and records that enabled the firms returns and revenues to appear higher, losses to appear lower, and balance sheets to skew towards favorable performance. The auditing firm, Arthur Andersen, clearly did not do their job properly, and they were possibly influenced by Enron into reporting heavy inflow of cash, and putting away the liabilities and debts that the company had undertaken.

Other than the fact that the executives entered deals which were extremely complex and bewildering to be clearly understood by many people, the “clever” accountants that worked for the company used many unethical practices to achieve their ends (McLean & Elkind, 2004). Enron misrepresented revenue recognition to make it seem as though they were bringing in more cash than they were on their services. For example, until September 2001, just a month before their exposure, Enron reported revenues of over 138 billion dollars.

Moreover, the company switched from straightforward presentation of revenues (selling price minus costs) and employed the Mark-to-market accounting, which they believed showed the true economic value of their company. Investors were often given

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“ENRON Ethical Breach Research Paper Example | Topics and Well Written Essays - 1000 words”, n.d.)
ENRON Ethical Breach Research Paper Example | Topics and Well Written Essays - 1000 words. Retrieved from https://studentshare.org/finance-accounting/1482996-enron-ethical-breach
(ENRON Ethical Breach Research Paper Example | Topics and Well Written Essays - 1000 Words)
ENRON Ethical Breach Research Paper Example | Topics and Well Written Essays - 1000 Words. https://studentshare.org/finance-accounting/1482996-enron-ethical-breach.
“ENRON Ethical Breach Research Paper Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/finance-accounting/1482996-enron-ethical-breach.
  • Cited: 0 times

CHECK THESE SAMPLES OF ENRON Ethical Breach

Review of Accounting Ethics

Based on your research, describe the organization, the accounting ethical breach and the impact to the organization related to ethical breach.... Given the corporate ethical breaches in recent times, assess whether or not you believe that the current business and regulatory environment is more conducive to ethical behavior.... This indicates that the business environment and regulations are conducive for ethical behavior (Kushniroff, 2011)....
4 Pages (1000 words) Essay

PAPER ABOUT ORGANIZATIONAL BEHAVIOR TOPIC

The organization behavior model that is discussed in this paper and the book at large is ethical leadership.... Therefore, let's define ethical leadership and then discuss how the concept of ethical leadership-as an organizational model-was revealed in the case of Enron.... ethical leadership In the recent times, there has been a lot of concern about ethical leadership within the corporate business, not forgetting the numerous scandals at Enron, Parmalat, WorldCom and big Irish banks such as Allied Irish Bank (AIB) and National Irish Bank (NIB (Trevino & Weaver, 77)....
10 Pages (2500 words) Term Paper

Ethical Leadership in Corporate America

Examples are, inflated accounting statements, tax stealing, intentional breach of contractual terms, manipulations in the financial markets, stealing government levies from outsourcing contracts etc.... This was one of the most rude shocks to the world about a country where ethical conduct is taught as dedicated management subject and Jesuit tradition of education is followed in so many universities.... The enron fraud revealed the huge extent of involvement of corporate executives in illegal market manipulations and tampering of financial books & balance sheets that can shake the fundamentals of US economy and in turn the global economy....
26 Pages (6500 words) Essay

Whistleblower Duty: Refuting Arguments Against Moral Obligations

nbsp;  Renowned American economist Milton Friedman offered a landmark statement when he suggested that corporate social responsibility means, primarily, making money for stockholders and implying that ethical behavior is therefore good for shareholder wealth (Nickels et al, 2005).... Enron Corporation, a now infamous American company which was bankrupted virtually overnight for eliciting false accounting practices, offered global business a learning lesson on truth in financial disclosure, insider trading, and the ethical fiduciary responsibilities of corporate managers and directors (Berenbeim, 2002)....
6 Pages (1500 words) Research Paper

Breach of Professional Accounting Ethics

This essay describes the once-in-a-lifetime accounting ethical fraud committed by Enron Corporation and its Auditor- Arthur Andersen, along with an exploration of the probable causes and the subsequent consequences.... The enron scandal initiated many criminal and civil lawsuits.... enron Corporation was an energy company established in 1985 with headquarters in Houston, Texas.... enron Corporation misused the rule and received the required amount from internal company managers or their wives....
3 Pages (750 words) Essay

Enrons Collapse and Ethical Framework

This essay discusses the collapse of Enron company, that presented the social scientists, media and business professionals with several other ethical issues that are prevailing in the business world.... The investors or the owners of the company were faced with the ethical dilemma of whether to hold on to the stock and lose their money or to support the company for the sake of hardworking employees who had nothing to do with these frauds.... The Laws that were legislated in response to the corporate failure were a fair attempt to institutionalize the ethical behavior....
9 Pages (2250 words) Essay

Accounting Ethics Breach

nbsp;The current business is more conducive to ethical behaviour.... This essay presents the failures of corporate giants like enron and WorldCom which greatly insisted the corporate world to review the existing corporate governance principles and improve the transparency of corporate transactions.... nbsp; As the essay declares the enron scandal was revealed in October 2001, and it resulted in the bankruptcy of enron Corporation, an energy company based in Huston, Texas, United States....
4 Pages (1000 words) Research Paper

Business Ethics: Case of Arthur Andersen

Fernando states that Spacey adopted the same culture of honesty, integrity, and ethical practices until Arthur Andersen was accorded the honors of being elected to the Accounting Hall of Fame of Ohio University in 1953.... During Arthur Andersons' unethical and fraudulent dealings with companies such as enron, WorldCom, Dynegy, and Sunbeam led to its indictment on 15th March 2002.... These scandals involved companies such as Waste Management (1997), Sunbeam (1998), Baptist Foundation (1999), and enron (2001)....
6 Pages (1500 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us