Comparison Between Enron And Arthur Anderson

Between the years 2000 and 2002 there were over a dozen corporate scandals involving unethical corporate governance practices. The allegations ranged from faulty revenue reporting and falsifying financial records, to the shredding and destruction of financial documents (Patsuris, 2002). Most notably, are the cases involving Enron and Arthur Andersen. The allegations of the Enron scandal went public in October 2001. They included, hiding debt and boosting profits to the tune of more than one billion dollars. They were also accused of bribing foreign governments to win contacts and manipulating both the California and Texas power markets (Patsuris, 2002). Following these allegations, Arthur Andersen was investigated for, allegedly,

Enron was the country’s largest trader and marketer for electric and natural gas energy. Its core business was buying energy at a negotiated price and later, selling the energy when prices increased. As an energy broker, Enron provided a service by allowing producers to negotiate a certain price while Enron took the risk that prices would fall below what it bought energy. Buyers of energy also benefited because Enron could ensure the supply of energy. In 2000 Enron was listed number five on the Fortune 500. What happened to the company which was among the most admired for vision and quality thinking? Enron was the company that held virtual assets and not the real assets, such as power stations, which were capital

sprees, wild corporate “gatherings” became the norm. Employees who could not afford the lavish lifestyle created at Enron began to take a toll on them. Trying to keep up with the crowd, lower level employees found themselves maxing out their credit cards and putting themselves in debt. This created an environment that seemed to worry less about earning actual profits. According to Li (2010), shareholders and employees were told by Enron’s CEO the stock would probably rise but did not disclose he was selling his stock while telling everyone else to buy. Shareholders were completely unaware of the irregularities going on at Enron and were constantly lied to about the company’s actual health. Actually, employees were never told by any of Enron’s top management team, the true status of the company. Li (2010) stated not only until the investigation surrounding Enron’s bankruptcy enabled shareholders to learn of the CEO stock sell-off before February 14, 2002 which is when the sell-off would otherwise have been disclosed. However, the most damaging act was committed by the accounting firm Arthur Andersen. According to Li (2010), their reputation was damaged by their admission on January 10, 2002 that employees of the firm had destroyed documents and correspondence related to the Enron engagement. The shredding of documents was a clear admission of guilt which eventually caused Arthur Anderson to also file for bankruptcy. Auditor’s reputation is based on being reliable, honest, and

Enron’s ride is quite a phenomenon: from a regional gas pipeline trader to the largest energy trader in the world, and then back down the hill into bankruptcy and disgrace. As a matter of fact, it took Enron 16 years to go from about $10 billion of assets to $65 billion of assets, and 24 days to go bankruptcy. Enron is also one of the most celebrated business ethics cases in the century. There are so many things that went wrong within the organization, from all personal (prescriptive and psychological approaches), managerial (group norms, reward system, etc.), and organizational (world-class culture) perspectives. This paper will focus on the business ethics issues at Enron that were raised from the documentation Enron: The Smartest Guys

The word “fraud” was magnified in the business world around the end of 2001 and the beginning of 2002. No one had seen anything like it. Enron, one of the country’s largest energy companies, went bankrupt and took down with it Arthur Andersen, one of the five largest audit and accounting firms in the world. Enron was followed by other accounting scandals such as WorldCom, Tyco, Freddie Mac, and HealthSouth, yet Enron will always be remembered as one of the worst corporate accounting scandals of all time. Enron’s collapse was brought upon by the greed of its corporate hierarchy and how it preyed upon its faithful stockholders and employees who invested so much of their time and money into the company. Enron seemed to portray that the goal of corporate America was to drive up stock prices and get to the peak of the financial mountain by any means necessary. The “Conspiracy of Fools” is a tale of power, crony capitalism, and company greed that lead Enron down the dark road of corporate America.

Even the small profits reported by Enron in 2000 were eventually determined to be only a illusion by court-appointed bankruptcy examiner Neal Batson. Batson’s report reveals that over 95% of the reported profits in these two years were attributed to Enron’s misuse of MTM and other accounting techniques. But while financial analysts could not be expected to know that the company illegally manipulated the earnings, the reported profit margins in 2000 were so low and were declining so steadily that they should have merited ample skepticism from analysts about the company’s profits.

Greg Whalley, (former Enron President and Chief Operation Officer) had six to eight conversations last fall with the Treasury’s Department Peter Fisher, including one in which he asked Fisher to call Enron’s lenders as they decided whether to extend credit to the company.

Enron Corporation was an energy company founded in Omaha, Nebraska. The corporation chose Houston, Texas to home its headquarters and staffed about 20,000 people. It was one of the largest natural gas and electricity providers in the United States, and even the world. In the 1990’s, Enron was widely considered a highly innovative, financially booming company, with shares trading at about $90 at their highest points. Little did the public know, the success of the company was a gigantic lie, and possibly the largest example of white-collar crime in the history of business.

The internal practices continued in large measure because of improper auditing from accounting firm Arthur Andersen. David B. Duncan, the leading audit partner to Enron, overturned many accounting concerns in the late 1990s such as fake transactions to hide debt and misrepresentation of earnings on financial statements.

In a front-page article with no less than four by-lines (7/03, "Enron Triggers a Slew of Proposed Fixes But What Will Stick?" by Steve Liesman et al.), The Wall Street Journal reports, "As more than 10 congressional committees pursue inquiries, 32 Enron-related bills have been introduced to address ills ranging from auditor conflicts of interest to the scams of an unregulated derivatives market. The Securities and Exchange Commission pledges to reform accounting rules, get tough on fraud and overhaul auditor oversight. General Electric Co. says it will issue a disclosure statement the size of a phone book, if that's what investors want." The trouble is that such a phone book, if it reflected the state economic

Enron’s stock was at its highest reaching at over $90 per share but quickly bottomed out at 9 cents per share. Stockholders, investors, and creditors wanted to know how one of the nation’s top accounting firms could have missed such changes and irregularity in Enron’s accounting practices. This was one reason that led to investigation into the accounting practices of the firm (Kay, 7). As a result, the US Department of Justice brought obstruction of justice charges against Andersen which ultimately ran Andersen out of business. Because of these charges, Andersen’s limited liability partnership found themselves in unfamiliar territory, and filed for bankruptcy shortly thereafter. Enron was estimated to have about twenty-three billion in liabilities which included outstanding debt and guaranteed loans. There were so many people and companies involved with the Enron Scandal of 2001. So many people lost their jobs, their lives due to bankruptcy, and their dignity. Another key person involved with this accounting scandal is

One of the most important fraud cases in the USA was The Enron case because of his criminal activity which involved a big part of USA.

1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your choices.

As per various researches, it has been proved that today variety of issues are prevailing in our society and all of them should be properly catered so that no further issues can be raised and this will, in the end, helps in reshaping the entire structure of our society too. Therefore proper measures should be taken from the very start so that no negativity can be raised and this will eventually help in enhancing the efficiency of our society too. The ethical code of conduct is linked directly with the research ethics and this is the major arena that should be highlighted positively in our society in order to enhance potential outcomes. In an organization, it is important to see how work is done by keeping in mind the ethical code of conduct and how it is affecting the society. In the majority of the fields, information security is not directly linked with the security and ethics and this is the reason how it is leading towards various alarming issues too. Therefore it is important to see how to enhance the effectiveness of various products. This paper will focus on ethics and how Eron faced issues due to lack of ethical strategies (Conroy & Emerson 2006).

The leading factor that had Enron into its demise revolves around the notion that, “companies are often so concerned with appearance and damage control that they are unwilling to engage in the degree of examination required to root out the entrenched causes of trust violations” (Hurley, Gillespie, Ferrin & Dietz, 2013). The historical performance of Enron’s rising share prices, coupled to the constant positive media attentions, only added fuel to the fire in terms of Enron’s competitive culture. As a consequence of these external factors, Enron’s top management felt the need to be able to sustain their image of rapid growth, since negative balances on their financial reports would have been an indication to investors that Enron may not be as successful as it appeared after all, leading to possible negative repercussions towards their overall performance, and potentially inevitably lead to its ill-fated downfall. Therefore to prolong their fate, Enron employed the use of highly questionable accounting methods and the use of deceiving partnerships, such as SPE’s (Special Purpose Entities), with the aim to create a façade that they’re highly successful by shrouding losses, falsifying profits and to conceal debt amounts.