Aims The primary rational behind the study of case study is to explore the contemporary unethical accounting practices that are being followed by the companies and to critically analyze the aspects and consequences related to these practices. Fortune magazine had so elected six consecutive years as the most innovative company.
All stakeholders were, obviously, affected by the collapse of Enron. Standards have been developed for similar and regular working of different organizations Smith ; Smith, Ethical Decision Making and Cases, 10 th ed.
Following the right ethical policies will lead to development of a good corporate image, as well as, will build up the trust and confidence of the customers. James Brackner, one of the members of IMA International Management Accounting Committee in July said that ethical training for decision making is emphasized by the universities.
InEnron reported earnings of over U. Although being recorded as related third parties, these partnerships were never consolidated so that debt could be getting off its balance sheet and the company itself could boost and have not had to show the real numbers to stockholders.
These are serious problems, but corporations have survived worse, and Enron could have been fixed with new management committed to reform. Cases However, Enron does not have to be reduced to a mere page in a history book.
The bankruptcy left in ruin to thousands of its employees who lose their job proficiently collapse saw shares U. These conditions are crucial to preventing similar business fraud in the future.
The money was to be used for debt repayment, and represented a substantial increase over a previous offer. Typically, Andrew Fastowexploited on the main goal special purpose entities, which as to provide methods of raising money without reporting the debts in the balance sheet.
The goal was nothing more or less, to inflate the market value. Houghton Mifflin,pp. The major companies involved in it are Enron, WorldCom, etc.
It is also believed Andersen was influenced to destroy auditing documents because of the large consulting fees Enron paid them. Enron had not provided true information regarding their financial position and mailed their stakeholders such as employees, investors, public, etc.
Corporate culture also indicates the same thing. Officials swore that such a disaster would never occur again and passed legislation like the Sarbanes-Oxley Act to prevent future business fraud.
Like the Enron scandal, the financial crisis largely stemmed from corporate misconduct.
But Enron Corporation was not paying taxes according to the profits Hinman, The Smartest Guys in the Room. Retrieved February 9, from http: In the case of creditors, a large sum of money would be gone, both principle and interest that they could have gained. WorldCom is also involved in corporate fraud and violation of ethical business practices and accounting standards.
Questionable accounting leads to collapse Questionable accounting leads to collapse Case Study: Ideally, the external auditor to Enron was, Arthur Andersen LLP, was to ensure that the company had a correct financial statement devoid of wrongdoings however, the auditor colluded to cover up corruptions and failed to provide reassurance in financial statements without any conflict of interest since they become partakers of the massive malpractices Catanach and Ketz, On a more personal level, four thousand former Enron employees had to struggle to find jobs, and many retirees lost their entire retirement portfolios.
The law firm wrote opinion letters supporting the legality of the deals Enron was making even though they were illegal. However, Anderson was found guilty of obstruction of justice in March for destroying Enron-related auditing documents during an SEC investigation of Enron.
We would all like to believe we would have done the right thing and report the company and its CEO as well as the CFO. Thus, on the basis of above Discussion, it can be concluded that ethical standards can definitely help to keep a check on corporate fraud. Unethical behavior is not a key to achieve heights in business Subramanyan, ASSIGNMENT #5: Read "Case 9: Enron: Questionable Accounting Leads to Collapse" on pp.
(attached). Answer the questions at the end of the case. Answer the questions at the end of the case.
Tutor Answer. Additionally, Arthur Andersen LLP was Enron’s auditor. More than employees at Arthur Andersen were dedicated to Enron’s account. The firm was a major business partner of Enron and some Arthur Andersen executives accepted jobs with Enron. Methodology/Approach: Employing the case study method, the paper synthesises, analyses, and interprets all aspects of corporate governance that lead to Enron's collapse based on three main reports: The Powers Report (Powers, Troubh and Winokur ), the Testimony of Chief Investigation (Roach ), and The Subcommittee’s.
Enron’s bonus program encouraged the use of non-standard accounting practices and the inflated valuation of deals on the company’s books. Indeed, deal inflation became widespread within the company as partnerships were created solely to hide losses and avoid the consequences of owning up to problems.
Transcript of Enron: Questionable Accounting Leads to Collapse Enron's History: Before the collapse Created out of the merger of two major gas pipeline companies in Enron: Questionable Accounting Leads to Collapse Words | 9 Pages.
Enron: Questionable Accounting Leads to Collapse The Enron Corporation was established by integrating two major gas pipelines inDownload