...ENRON The Downfall of Enron Introduction In recent months, the well publicised collapse of Enron has dominated the international financial news. The impact that Enron has had on both the accounting and business world will be long lasting and there is a need for an accounting shake-up. German newspapers have been casting doubts on the long-term prospects of the so-called “Big 5”. Some articles have been sceptical over the remaining “Big 4” accounting firms’ future and see Andersen as the start of a long-term downturn in the accounting world. (“Das Ende der Big 5”, ICN 2002) Andersens were auditors of Enron until the company’s collapse. They were not only auditors but provided consultancy. This was one of the major factors behind Enron’s collapse, as there were conflicts in their duties. Andersen could have found their fees cut substantially if they did not comply with Enron’s auditing demands. Acconting firms want their consultancy practices to be efficient. Therefore, they want their clients to look as profitable as possible. However, auditors need to provide a true and fair view of the accounts. They must not be tempted to manipulate financial reports. In Enron’s case, thıs duty was neglected. There is a lot of literature on creative accounting and Andersens used some of oldest tricks of manipulation. Enron’s financial reports had hidden liabilities and capatalised many expenses which should have been written off in the year they occured. As a result, profits were...
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...Examining a Business Failure: The Downfall of Enron Team D: LDR/531 2012 Eric Heard In December of 2001, Enron was forced to file for bankruptcy after an investigation of their finances. This investigation uncovered a history of conspiracy, money laundering, and inside trading that led to one of the largest fraud scandals in history (Cernusca, 2011). As a result, businesses should examine exactly where this powerhouse faltered. The areas to be studied specifically are organizational structure, leadership, and management (Yuki, 2010). Once this is complete, business should learn from Enron's mistakes and be careful not repeat history. Organizational Structure's Part of the Enron Failure When looking at an organization, the structure which is defined as “how job tasks are formally divided, grouped, and coordinated” is important to fully understand the organization and how it can be an asset or in the case of Enron a failure (Robbins & Judge, 2011, p. 493). Since the fall of Enron people have studied the company to see what caused the failure. Due to Enron’s failure we have new legislation to help prevent some of the issues from happening again in other companies from the Sarbanes Oxley Act (SOX). One of the reasons for the act was the way Enron’s upper management ran the company. One key element to organizational structure is Centralization and Decentralization decision-making. This key aspect could be argued as the main...
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...All these can be causes for a person behaving or acting the way he does. Same is the case with me. I did not realize the actions I did were good or bad until I saw the side effects of them. The side effects were evident through the different events that occurred in my life later on. The realization came to me only after experiencing those events. The realization was a gradual process.(transition) Few months back I got admission in IBA, in the field of BBA. It is considered to be one of the top universities for bachelors in business administration in Pakistan. In the first couple of weeks everything sailed smoothly, and I thought I was on top of the world. But as the saying goes, everything that goes up must come down, and so I to had a downfall. As time passed on I noticed and felt something strange. Every day I used to have that same feeling. It was as if I was lacking in something, maybe it was that I could not fit with my mates, or not enjoying the university life. For about a weak I could not figure out what had went wrong, and what I should do. But the day finally arrived, the day on which I came to know the real reason behind it. It was a Friday like any other normal Friday, 8:30 in the morning, and I was sitting in my philosophy class half asleep as usual. The teacher was giving her typical philosophical views about the world, as if I had fewer problems in my life already. She finished her lecture, and told the class that she will be awarding the class...
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...Running head: Enron Annual Analysis Analysis of Enron Principles of Management Abstract Enron Creditors Recovery Corporation was an American energy company based in Houston, Texas. Before its bankruptcy in late 2001, Enron employed around 21,000 people (McLean & Elkind, 2003) and was one of the world's leading electricity, natural gas, pulp and paper, and communications companies, with claimed revenues of $111 billion in 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years(Fortune, 2000, pg.45-50). It achieved infamy at the end of 2001, when it was revealed that its reported financial condition was sustained mostly by institutionalized, systematic, and creatively planned accounting fraud. Enron has since become a popular symbol of willful corporate fraud and corruption. The following is the 2000 annual report analysis that talks about the ethics, corporate responsibilty, organizational policies and applicable theories. ethics According to the 2000 annual report, the company values are as follows. “We have an obligation to communicate, take the time to talk to one another and listen. We believe that information is meant to move and that information moves people”(Enron, 2000, pg.55). The company had a good ethical philosophy of communication. Still if employees would communicated from the beginning some corrections would have been made and possibly the company would stills stand today. “We treat others as would like to be treated ourselves...
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...Ethics Paper Regina Zamora-Chilin MGT/498 November 20, 2011 Professor: Dr. Earl Levith Ethics Ethics as will be described in this paper pertains to the social responsibility that any business must possess at the time of developing a strategic plan while considering stakeholder needs and agendas. This paper will discuss the Real Estate sector of the United States’ economy as well as a well known company called Enron, and its questionable overstep into unethical practices on various levels that brought forth government interference. For Enron, it is through the Sarbanes-Oxley Act (SOX) that all businesses are measured to prevent and avoid unethical situations from taking place. The Role of Ethics The role of ethics and social responsibility has increased tremendously over the past decade for the majority of corporations. In the past, corporations have probably not paid enough attention to doing what is socially responsible because there were no strict government guidelines to follow. Even though the United States is a rule-based country, corporations have in past years managed to mishandle corporate standards. Ethics and social responsibility forces corporate employees at senior levels to stop and examine their activities in an effort to reduce violating the law. If executives are able to identify unethical practices then they will do ‘the right to set preventive measures or disciplinary actions to employees who are not in compliance with the corporation’s standards...
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.... Burton Final Paper: The Enron Scandal MSA 602 Dr. Pendarvis 12-4-2011 Abstract Enron's collapse is generally viewed as a morality tale - the natural result of managerial greed, a clueless board, and feckless gatekeepers. But none of these aspects of the story clearly distinguishes Enron from other major firms during the bubble era of the late 90s. This material identifies certain economic facts from the many moving parts that was Enron, and organizes them along two main threads. The first describes Enron's major businesses, and the incentives and constraints under which the managers of those businesses operated. The second thread describes the basic financial engineering tools developed by Enron's finance department. These threads are then woven into the timeline of Enron's ultimate collapse. What emerges is a tale of how bad bets that resulted in good outcomes came to be viewed by top management and the board as bets worth repeating on an ever-larger scale. Early success in highly risky ventures were ramped up and duplicated, under perverse incentives, into a financial disaster. The firm then doubled down on that disaster with non-economic hedges developed by the finance group. The CFO, in a wholesale breach of his fiduciary responsibilities, including corruption of various gatekeepers, managed to cloak the poor quality of his hedges and his motivation in creating them. This duplicity prevented...
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...A new strategy Enron was the biggest seller of natural gas in North America in 1992, their EBIT was 122 million dollar. Enron used differentiation strategy which aimed to develop and operated with different assets such as pipelines, services, paper plants, water plants and electricity plants. Enron did not just make profit on its assets but also traded with contracts of the assets and service in order to reach higher profit. This is how Enron became a favourite among investors in the ‘90s and its stock price increased 311%. The growth did not stop until the year of 2000. Enron’s market value was above 60 billion dollars and its stock price was 83,13 dollars the 31 December of 2000. The Commodity Futures Modernization Act of 2000 helped them with their derivatives businesses. “One example was during the California electricity crisis (2000-2001) where they manipulated the California energy market and sent electricity prices surging by at least a factor of eight. During that time, the price of natural gas was trading as much as $60 per thousand cubic feet in California (which was previously selling for about $3 per thousand cubic feet). This kind of manipulation increased Enron's stock price and revenues. But this not so clever manipulation of Enron made itself a political target and accelerated the ruins of their finances.” Enron’s downfall Mark-to-market Accounting The use of mark-to-market accounting later struck back. The Enron’s aggressive accounting had corrupted...
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...Arthur Andersen: Questionable Accounting Practices Steven Young Strayer University Business Ethics: Ethical Decision Making and Cases Dr. Mary Tranquillo November 13, 2012 Arthur Andersen: Questionable Accounting Practices p1 Arthur Andersen, one of the largest accounting firms in the United States, “a name that was synonymous with trust, integrity, and ethics” (Ferrell, Fraedrich, & Ferrell, 2011, p. 348), through a loss of its founder Arthur Andersen, and change in its corporate culture resulting in many unethical business transactions that affected multitudes of primary stakeholders had to close its doors in 2002 after 90 years of business. Review the mandated requirements for legal compliance (from chapter 4) and determine which requirements apply to the Arthur Andersen case. Explain your rationale After re-reading Chapter 4 there are five areas that separate the mandated requirements for legal compliance, and I feel the that two apply to the Arthur Andersen case; the protection of consumers, and incentives to encourage organizational compliance programs. In the laws that protect consumers they require businesses to provide accurate information protecting them from financial scams, unfair, fraudulent, or deceptive practices. There are “Gatekeepers” that are in charge of that such as lawyers, financial rating agencies, and financial reporting services that help enforce high ethical standards. This...
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...THE COLLAPSE OF ENRON & THE INTRODUCTION OF THE SARBANES OXLEY ACT BY TREVOR GARRETT 02/25/2011 Abstract Enron Corporation was one of the largest energy trading, natural gas and Utilities Company in the world that was based in Huston, Texas. The downfall of Enron is one of the most infamous and shocking events in the financial world, and its reverberations were felt around the globe. Prior to its collapse in 2001, Enron was one of the leading companies in the U.S and considered among top 10 admired corporations and most desired places to work at. Its revenues made up US $139 to $184 billion, assets equaled $62 to $82 billion, and the number of employees reached more than 30,000 people in 20 countries around the world. While on the surface it seemed like the perfect Corporation, internally it had highly decentralized financial control and decision-making structure, which made it practically impossible to get coherent and clear view on corporations' activities and operations. Enron manipulated its books and assets to help it report steady profit growth to Stock Exchanges and Credit-rating agencies. Investors generally are not willing to pay as much for the stock of a volatile trading operation, and this gave rise to manipulations. This paper briefly describes the legal and ethical breaches by Enron, the key factors and events that led to its collapse and the passing of the Sarbanes Oxley Act as a consequence of such a catastrophe. The paper also discusses the key components...
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...recent years has evolved drastically and greater accountability and consequences have been issued to corporations. In the United States authorities made many headlines with companies who practiced fraudulent activities, such as Enron, to serve as a warning to those who dare break rules in the future. The Organization Enron, According to (Eichenwald, 2006), was a U.S. energy-trading and utilities company that housed one of the largest accounting frauds in history. The company was based in Houston, Texas. Enron employed about 20,000 people and was the world’s largest natural gas, electricity, communications and pulp and paper company. As reported by Fortune.com, Enron had revenues of nearly $101 billion during year 2000. Fortune also named Enron “America’s Most Innovative Company” for six consecutive years. Accounting Ethical Breach Enron’s downfall, and the imprisonment of several of its leadership group, was one of the most shocking and widely reported ethics violations of all time as stated by (Silverstein, 2013). It not only bankrupted the company but also destroyed Arthur Anderson, one of the largest audit firms in the world. The Securities and Exchange Commission (SEC) announced in 2001 that it was investigating the accounting practices of Enron after several years of questions raised...
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...companies are criticized for their unethical decisions because of the difference in values between the stakeholders and the business people. The common scenario in most of the businesses or organizations is that some business people think for maximum profit of the company. The profit of the company is good and is the key achievable objective for the company, whereas other people in the company may have a different perspective to work in. Enron is a good example of a company overstepping ethical boundaries for stakeholder’s agendas. Enron, the natural gas pipeline company held a conference in Houston for Wall Street investors and analysts. The audience includes the financial experts on the natural gas and power industries for the talk of Enron’s capabilities for its rapidly growing business of numerous commodities such as electricity, and network bandwidth (The Enron Scandal). The Enron’s president, Jeffery Skilling suggested that the money losing for this broadband network business is worth of $29 billion or the $37 per share. As it states “Now Enron teeters on the brink of bankruptcy, and it's tempting to paint its demise as a series of extra ordinary events driven by behind-the-scenes deals hidden by questionable accounting. And...
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...Are Ethics in the Workplace Disappearing? By CATHERINE VALENTI Feb. 21, 2012 Enron executives allegedly made millions selling company shares while urging employees to buy the soon-to-be-worthless stock, and set up private partnerships that cloaked huge losses as they touted their successes to investors. While investigators struggle to determine who knew what when in the Enron debacle, the giant energy firm's implosion promises to be a virtual case study in corporate ethics. Was the downfall the fault of a few executives who knowingly misled others, the outcome of a distorted corporate culture, or mere incompetence? Bad Actors, Peer Pressure The history of business in the United States is littered with tales of fraud, deceit and corruption, not only by the hands of a greedy few at the top, but also with the help of employees willing to go along with the charade. Unethical behavior at the office can sometimes stem from a few "bad apples" among the bunch, people like Nick Leeson, the young stockbroker whose huge losses from illegal trades led to the downfall of the venerable Barings Bank. But experts note that ethical breaches are often the result of the corporate culture or pressure from management, pressure that can emerge when a company finds itself unable to live up to financial forecasts or expectations and tries to bend the rules to achieve them, says Linda Treviño, professor of organizational behavior at Penn State's Smeal College of Business Administration...
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...cheating. This caused a culture of deception. Employees were measured on their abilities to cheat. In such an environment, the people who never cheated were regarded as odd. For example, Margaret Ceconi, an employee with Enron Energy Service, once wrote a memo about the truth of accounting issues of Enron; she was later counseled on employee morale * Because of competition in workplace between employees. Competition environment can cause mistakes and cheating because employees don't tend to cooperative and less communicated with each other. They become selfish. Even they don't ask questions for each other because asking the question was regarded as a weak. Then, they will not share resources or information with each other because of competition. So in Enron, no persons asking questions and no one want to answer questions. Because of this working environment, few employees at Enron actually understood their jobs. As a result, they just tried to hide errors and made their work look good. In addition, they ignored the errors and cheatings of others. They never mentioned their doubts about others’ works. Because they thought if others were not actually wrong, the person who mentioned questions would be laugh at. So employees at Enron were quie * Enron emphasized too much on the financial goals. The person who can achieve the budget numbers would...
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...should have been turned in sooner and I was unable to receive credit. I currently hold a 1.85 GPA. It is very important to me that I receive a degree. I have two children to support and hopefully one day I will be able to provide for my mother seeing how I am in the position I will be “sandwiched” by raising children and caring for my mother. Psychology has always been my passion since I was very young. I always read books growing up covering mentally ill patients and what kind of therapy was given. I want to help my community with my degree I plan to work with veterans. In this current term I have 90’s in both classes I have almost attended every live seminar< I’ve missed two and I did complete option 2. Since the seminars were my downfall from the last term I made it a goal and strategy not to miss one from this term and I have done pretty well. I am thinking my GPA will come up dramatically in this term but just in case I wanted to turn in this letter, Thank you for your...
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...The Battle of Okinawa, codenamed Operation Iceberg,[3] was fought on the Ryukyu Islands of Okinawa and was the largest amphibious assault in the Pacific War of World War II.[4][5] The 82-day-long battle lasted from early April until mid-June 1945. After a long campaign of island hopping, the Allies were approaching Japan, and planned to use Okinawa, a large island only 340 mi (550 km) away from mainland Japan, as a base for air operations on the planned invasion of Japanese mainland (coded Operation Downfall). Four divisions of the U.S. 10th Army (the 7th, 27th, 77th, and 96th) and two Marine Divisions (the 1st and 6th) fought on the island while the 2nd Marine Division remained as an amphibious reserve and was never brought ashore. The invasion was supported by naval, amphibious, and tactical air forces. The battle has been referred to as the "typhoon of steel" in English, and tetsu no ame ("rain of steel") or tetsu no bōfū ("violent wind of steel") in Japanese.[6][7][8] The nicknames refer to the ferocity of the fighting, the intensity of kamikaze attacks from the Japanese defenders, and to the sheer numbers of Allied ships and armored vehicles that assaulted the island. The battle resulted in the highest number of casualties in the Pacific Theater during World War II. Japan lost over 100,000 soldiers, who were either killed, captured or committed suicide, and the Allies suffered more than 65,000 casualties of all kinds. Simultaneously, tens of thousands of local civilians...
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