...ENRON CASE STUDY Title of the Article: * The first article of critique, talks about the ethical cultures and values of Enron and how this values and credence contributed to the collapse of this once corporate giants (Li, 2010). * Enron failures, the who, the how, and the why, that contributed to malpractices of its business practices (Gudikunst, 2006). Purpose of Research: The purpose of the first article of research is to depict the ethical views and practices of Enron’s Executives. During the Enron scandal several executives were charged with criminal acts from money laundering to insider trading and fraud (Li, 2010). This article of research shows how morals and ethical values differ in the eyes of different individuals. Second article of research explicate, how each stakeholders in the Enron scandal played a huge role in the collapse of the once was energy giant company (Gudikunst, 2006). Dr. Gudikunst explains how each executive and external stakeholder mislead employees and vested stakeholders in believing the organization was financially buoyant in their day to day business practices, and the reasons for the misappropriation of investors capital. Final this article touches the legal aspect of accounting practices. Research Questions Understanding an organization’s ethical values or business core practices is the baseline in understanding any defects which took place during the Enron’s scandal. Some of the purpose research questions for the first...
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...Business Research Paper RES/351 02/13/2013 Business Research Paper In this paper I will be going over the business ethics of a company that is known for one of the biggest frauds in corporate America. The company is Enron and I found an article that is titled " The Case Analysis of the Scandal of Enron" and in this article the author talks about the business practices on Enron and the unethical research they used to grow their business and in the end they ruined a lot of good people's lives, and damaged their futures. According to "Dictionary.com" (2013) ethics are the values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions. Every person has ethics and a code that they live by, but the difference is that not everyone has that same code and especially in the business world that word can be tricky for people and standing up for the code they believe in is hard for some. Unethical business practices is not a new thing, and as the economy has grown these practices have been more common. One unethical practice would be skewing the research results, or the skewing the research from your company. That is one thing that Enron did do, and they even took a step further and did certain practices that no one had ever thought of before. Enron was a natural gas company, and what they did is that they built power plants in a few different places and they took their future...
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...Business Research Ethics Javier Res 351 December, 2013 Business Research Ethics Unethical behaviors and practices in corporate America cause many faces to frown. This only causes the public to question why a number of people run their business with true honestly. Whereas, the other half run an entire business to the ground by attempting to fraud their customers and lie to the public about certain issues regarding the way they practice business. Another example of unethical practices would be insider trading, security fraud, and manipulation of the financial market. In some cases, unethical practice occurs because of greed, a sense of disconnection, and a sheer sense of ignorance. In this analysis, we will discover why, how and what business has ventured in this path of dishonesty. A prime example of this would be the Enron Corporation, which existed through the means of accounting and security fraud. Some brief information on the Enron Corporation is that it was “A U.S. energy-trading and Utilities Company that housed one of the biggest accounting frauds in history. Enron's executives employed accounting practices that falsely inflated the company's revenues, which, at the height of the scandal, made Enron become the seventh largest corporation in the United States. Once the fraud came to light, the company quickly unraveled and filed for Chapter 11 bankruptcy on Dec. 2, 2001.” (“Investopedia: Enron, 2013.) As Enron began to unravel, there were numerous reports...
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...The Enron Collapse Enron, a high profile organization which ranked as the seventh largest company in the United States during the 1990’s consisted of approximately 25,000 employees worldwide and held revenues in the tune of over 100 billion dollars in 2000. Enron controlled about one quarter of the gas companies in the United States and also expanded into Myriad energy products during its years of operation. The company traded hundreds of products throughout the wider Continentals including South America, Asia, Europe, Australia and also the United States, and was considered to be very successful with their trading strategies. An excerpt from an article in the CRS Report for Congress entitled The Enron Collapse: An Overview of Financial Issues, Mark Jickling, (February 4, 2002), states that “the firm was widely regarded as one of the most innovative, fast growing, and best managed businesses in the United States.” However, despite all of Enron’s fame and glory, the company crumbled as a result of bad management and unethical practices. According to Donaldson & Werhane (2008), “The controls as designed were not rigorous enough and their implication and oversight was inadequate at both Management and Board levels,” (p. 313). The purpose of this paper is to discuss the Enron Collapse and explain how the virtuous manager would have responded to working for Enron. Also being discussed is what the virtuous manager is expected to do if confronted with these decisions. Unfolding...
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...Ethics Case: Arthur Andersen’s Troubles Once the largest professional services firm in the world, and arguably the most respected, Arthur Andersen LLP (AA) has disappeared. The Big 5 accounting firms are now the Big 4. Why did this happen? How did it happen? What are the lessons to be learned? Arthur Andersen, a twenty-eight-year-old Northwestern University accounting professor, co-founded the firm in 1913. Tales of his integrity are legendary, and the culture of the firm was very much in his image. For example, “Just months after [Andersen] set up shop in Chicago, the president of a local railroad insisted that he approve a transaction that would have inflated earnings. Andersen told the executive there was “not enough money in the City of Chicago” to make him do it.”1 In 1954, consulting services began with the installation of the first mainframe computer at General Electric to automate its payroll systems. By 1978, AA became the largest professional services firm in the world with revenues of $546 million, and by 1984 consulting brought in more profit than auditing. In 1989, the consulting operation, wanting more control and a larger share of profit, became a separate part of a Swiss partnership from the audit operation. In 2000, following an arbitrator’s ruling that a break fee of $1 billion be paid, Andersen Consulting split completely and changed its name to Accenture. AA, the audit practice, continued to offer a limited set of related services, such as tax advice.2 Changing...
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...Enron Case Study Frank Bruno Auditing 1:00-2:15 Enron Case 2 Due: 04/28/05 1. Please explain why an accounting and auditing research function (like Andersen's PSG) is important in the operations of a CPA firm. What role does the function play in completing the audit? Due to new regulations, NYSE listed companies are required to have internal audit departments. The purpose and importance of an internal audit team are very obvious. The internal audit team is responsible for determining the scope of the work and having the personnel and budget to complete it. This internal entity is very important ever since such accounting scandals as Enron and WorldCom. They are required to provide management and the audit committee with ongoing assessments of the company's risk management processes and system of internal control. In terms of these groups in association with CPA firms it is also important to have. As seen in the Enron case, the PSG group voiced its nonapproval to the companies formation of a new entity. These groups usually have the companies general goal in mind during the decision making process. In the case of Enron, it did not see any benefit in the creation of a new group. A member of the group cited several reasons including conflict of interests by having the CFO manage the venture equity group. Internal auditing functions play large role in the scope and budget of an audit. 2. Please consult Section 103 of SOX. Do you believe that the Engagement Leader of an Audit...
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...Journal of Economic Perspectives—Volume 17, Number 2—Spring 2003—Pages 3–26 The Fall of Enron Paul M. Healy and Krishna G. Palepu F rom the start of the 1990s until year-end 1998, Enron’s stock rose by 311 percent, only modestly higher than the rate of growth in the Standard & Poor’s 500. But then the stock soared. It increased by 56 percent in 1999 and a further 87 percent in 2000, compared to a 20 percent increase and a 10 percent decline for the index during the same years. By December 31, 2000, Enron’s stock was priced at $83.13, and its market capitalization exceeded $60 billion, 70 times earnings and six times book value, an indication of the stock market’s high expectations about its future prospects. Enron was rated the most innovative large company in America in Fortune magazine’s survey of Most Admired Companies. Yet within a year, Enron’s image was in tatters and its stock price had plummeted nearly to zero. Exhibit 1 lists some of the critical events for Enron between August and December 2001—a saga of document shredding, restatements of earnings, regulatory investigations, a failed merger and the company filing for bankruptcy. We will assess how governance and incentive problems contributed to Enron’s rise and fall. A well-functioning capital market creates appropriate linkages of information, incentives and governance between managers and investors. This process is supposed to be carried out through a network of intermediaries that include professional...
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...can have a significant impact on work life, research has confirmed that such doubt is unwarranted. A multitude of research has demonstrated that ethics is related to a variety of important job related outcomes. For example, studies have shown that a higher ethical work climate (Mulki, Jaramillo, and Locander, 2008) and top leadership support for ethics and both positively relate to job satisfaction. Ethics codes (Valentine and Fisherman, 2008), ethics training, and perceived corporate social responsibility are also linked to job satisfaction. Unethical business research at work ranges from minor acts of deviance to immoral decisions that result in catastrophes such as the Enron and Merrill Lynch & Co Inc. These fields of research provide especially clear data on connection between unethical workplace acts and wellbeing: discrimination, bullying and injustice. Even though ethics is sometimes under looked in business it is an important conduct in the organization for a variety of reasons. Organizations have to ensure that they practice high standards of ethics in the organization to rip maximum benefits and avoid scandals such as the Enron And Merrill Lynch & Co Inc. Enron Corporation and Merrill Lynch & Co Inc, both practiced unethical business behavior, this is because two of their top officials were involved in fraudulent activity or were charged with conspiracy to commit fraud and other crimes. A former in house accountant at Enron Corp and a former Vice President were both...
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...Unethical Business Research RES 351 May 13, 2013 Unethical Business Research Unethical business research can be described as many things. From asking inappropriate questions, to using participant information for unintended purposes such as selling goods or services, these acts have caused major scandals in the business world. Good business ethics are the foundation in which a company is built on. All businesses have a code of conduct that is set out by human resources and upper management. This code will set the behavior expectations for employees in their daily tasks and projects for the company. Alliance Capital is among one of major companies that conducted unethical research in the early 2000’s. Before their downfall they caused damage financially and personally, which had effects nationwide. People Involved Alfred Harrison was the vice chairperson of Alliance Capital, and the manager of Florida’s pension plan account (Lawyershop.com, 2003). He used a “V-method” approach to investing, which lead Alliance to the purchase of 4.9 million shares of Enron in late 2001. Frank Savage, a director of Alliance was another key member involved in the company’s unethical acts. Frank was also a member on Enrons’ board and many suspected that he pressured Alliance to purchase the shares even though the company was on the downfall. The actions of both these individuals caused Alliance to be charged with "breach of contract, breach of covenant of good faith and fair dealing, breach...
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...STUDY:- Once the seventh largest company in America, Enron was formed in 1985 when InterNorth acquired Houston Natural Gas. The company branched into many non-energy-related fields over the next several years, including such areas as Internet bandwidth, risk management, and weather derivatives (a type of weather insurance for seasonal businesses). Although their core business remained in the transmission and distribution of power their phenomenal growth was occurring through their other interests. Fortune Magazine selected Enron as "America's most innovative company" for six straight years from 1996 to 2001. Then came the investigations into their complex network of off-shore partnerships and accounting practices The saga of the ENRON Corporation has been unfolding in the media for well over a year. In the span of only three years, ENRON has gone from public and professional acclaim of the company and its senior executives to scorn, infamy and bankruptcy. Its public auditing firm, Arthur Andersen, has basically been destroyed, as well as publicly disgraced. Tens of thousands of employees and investors have been emotionally and financially affected. Major financial services firms in banking, securities brokerage and insurance have been, and may yet be, drawn into the legal battles regarding who is to blame for the ENRON failure. Enron grew wealthy due largely to marketing, promoting power, and its high stock price. Enron was named "America's Most Innovative Company" by Fortune...
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...Frank Bruno Auditing 1:00-2:15 Enron Case 2 Due: 04/28/05 1. Please explain why an accounting and auditing research function (like Andersen's PSG) is important in the operations of a CPA firm. What role does the function play in completing the audit? Due to new regulations, NYSE listed companies are required to have internal audit departments. The purpose and importance of an internal audit team are very obvious. The internal audit team is responsible for determining the scope of the work and having the personnel and budget to complete it. This internal entity is very important ever since such accounting scandals as Enron and WorldCom. They are required to provide management and the audit committee with ongoing assessments of the company's risk management processes and system of internal control. In terms of these groups in association with CPA firms it is also important to have. As seen in the Enron case, the PSG group voiced its nonapproval to the companies formation of a new entity. These groups usually have the companies general goal in mind during the decision making process. In the case of Enron, it did not see any benefit in the creation of a new group. A member of the group cited several reasons including conflict of interests by having the CFO manage the venture equity group. Internal auditing functions play large role in the scope and budget of an audit. 2. Please consult Section 103 of SOX. Do you believe that the Engagement Leader of...
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...Case #2.4 – Enron: Quality Assurance I. Technical Audit Guidance To maximize the knowledge acquired by students, this book has been designed to be read in conjunction with the post-Sarbanes-Oxley technical audit guidance. All of the post-Sarbanes-Oxley technical guidance is available for free at http://www.pcaobus.org/Standards/index.aspx. In addition, a summary of the Sarbanes-Oxley Act of 2002 is also available for free at http://thecaq.aicpa.org/Resources/Sarbanes+Oxley/Sarbanes-Oxley+–+The+Basics.htm. II. Recommended Technical Knowledge The Sarbanes-Oxley Act of 2002 Section 103 Section 203 III. Classroom Hints This case provides students with an opportunity to understand what is meant by quality control in the financial statement audit process and to understand why a quality control mechanism is an important internal control procedure for an audit firm. Further, the case provides a terrific example for students to see what can actually happen when quality control breaks down at an audit firm. In the case of Arthur Andersen, the breakdown in quality control ultimately led to the demise of the firm. To meet these objectives, this case illuminates the role of the professional standards group (PSG) at Arthur Andersen and the dialogue that occurred for several technical issues between Andersen’s PSG and the lead partner on the Enron engagement, David Duncan. We believe it is essential for students to carefully read over the recommended technical knowledge, along...
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...Enron Corp. Ivan Rodriguez Professor Daniel Smith Legal 100 April 30, 2011 2. Discuss whether Enron’s officers acted within the scope of their authority. 3. Describe the corporate culture at Enron. 4. Discuss two alleged irregularities in the actions between sellers of securities and Enron. 5. Discuss whether or not Enron was liable for the actions of its agents and employees. The format of the report is to be as follows: o Typed, double spaced, Times New Roman font (size 12), one inch margins on all sides, APA format. o Type the question followed by your answer to the question. * In addition to the 3-4 pages required, a title page is to be included. The title page is to contain the title of the assignment, your name, the instructor’s name, the course title, and the date. Describe how Enron could have been structured differently to avoid such activities. Using computers, the Internet, and other resources, research the activities of the Enron Corporation (Enron), its officers, and its agents (auditors and sellers of securities). Using all the material presented thus far in the course, analyze the activities you researched. The Enron Corporation was an American energy company, which since its merger in 1985 with two other natural pipeline gas companies Houston Natural Gas and InterNorth failed to structure a corporation built around strong ethics and accordance with the law. It would be fair to predominantly commence by...
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...Business Research Ethics Mary Beth Dooley Res 351 March 26, 2012 Erica Mitchell Unethical issues are something that every business greatly tries to ignore. This isn’t always the case but a majority of them try to make sure they are handling all business in a very ethical way. The article that I read speaks about a business that didn’t act in such a way when it came to some of the information that it shared with stockholders and analysts. The company in which I speak about is going to be Enron. This company was apart of one of the biggest cases of fraud the country had ever seen. Enron was a Texas based company. It was formed in 1985, out of the junk-bond merger of two old-line natural gas companies. These companies were known as Houston Natural Gas and Omaha InterNorth. The deal integrated several pipeline systems to create the first nationwide natural gas pipeline system. Ken Lay, who had been the chief executive officer of Houston Natural Gas, was named chairman and chief executive officer of the company we now known as Enron. In 1994, Enron made its first electricity trade, beginning what would turn out to be one of the company’s biggest profit centers for the next few years. It took just over 15 years for Enron to turn itself into one of the world’s largest energy traders. Enron started out as a very successful company but somehow along the line, they got off the right track where they would be helping their clients and shareholders...
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...Journal of Economic Perspectives—Volume 17, Number 2—Spring 2003—Pages 3–26 The Fall of Enron Paul M. Healy and Krishna G. Palepu F rom the start of the 1990s until year-end 1998, Enron’s stock rose by 311 percent, only modestly higher than the rate of growth in the Standard & Poor’s 500. But then the stock soared. It increased by 56 percent in 1999 and a further 87 percent in 2000, compared to a 20 percent increase and a 10 percent decline for the index during the same years. By December 31, 2000, Enron’s stock was priced at $83.13, and its market capitalization exceeded $60 billion, 70 times earnings and six times book value, an indication of the stock market’s high expectations about its future prospects. Enron was rated the most innovative large company in America in Fortune magazine’s survey of Most Admired Companies. Yet within a year, Enron’s image was in tatters and its stock price had plummeted nearly to zero. Exhibit 1 lists some of the critical events for Enron between August and December 2001—a saga of document shredding, restatements of earnings, regulatory investigations, a failed merger and the company ling for bankruptcy. We will assess how governance and incentive problems contributed to Enron’s rise and fall. A well-functioning capital market creates appropriate linkages of information, incentives and governance between managers and investors. This process is supposed to be carried out through a network of intermediaries that include professional...
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