Review of Accounting Ethics



Enron Scandal

Introduction

This paper reviews one of the most famous scandals in the accounting history i.e. Enron Scandal. Different aspects of this scandal are highlighted and discussed in this paper.

1. 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. Provide support for your answer.

The year 2002 saw the corporate scandals increase and this catapulted the people's distrust in corporate leaders. Furthermore there was no change in the level of improvement in public policy. There was also no significant change in public policy. Some futurists believe that it will require the likes of a very monstrous crisis situation, such as the emergence of a major depression or a vast breakdown in regulation to arise the general public from its doped state of consciousness.

The Scandal of Enron had raised the issue of regulation for financial institutions. It was evident now that Investment banks can earn far more money in process of under writing as compare to relying only on broker fees. Therefore it had been a conflicting situation for the employees to either make happy their employers or executives by showing them profitable results in reports or picturing the true image in front of investors.

2. Based on your research, describe the organization, the accounting ethical breach and the impact to the organization related to ethical breach.

The Enron scandal is one of the most memorable scandals in American history. It is a symbol of excessive fraud and unethical practices for the world. Enron scandal raised the issue of compliance, risk management and ethics on a larger scale. The auditor, Arthur Anderson was accused for forming partnerships off-the-books in order to hide the debt burden, increasing executive's capital, destroying the relevant official documents and breaching the trust of its employees. The total loss to investors was about US$64.2 billion during the time period of August 2000 till December 2001, when the Enron's shares got delisted from the exchange (Neuman. E. 2005).

Enron began its operations in 1985. Its main areas of functions were electricity, gas, communication and paper productions. Enron got bankrupted in 2001. Enron revenues were once US$9 billion in 1995, and US$1 billion in 2000, these were the years when Enron earned the maximum profits out of its operations. In December 2001, It was discovered that its financial statements were misrepresented and prepared falsely in order to boost profits and revenues.

The Enron's image was distorted before its investors mainly for two apprehensions. Firstly the management of Enron fabricated the operations and manipulated the official documents to increase the profits and secondly, top management expressed their unawareness and carelessness regarding the Enron scandal. All the executives and managers responsible for falsifying the documents and accounts to show wrong figures of profit as per the orders of top management were charged for this crime.

3. Determine how the organizational ethical issue was detected and how management failed to create an ethical ...