Enron: An Ethics Case Study

1834 Words8 Pages
Running head: Enron and Ethics

Enron: An Ethics Case StudyEnron: An Introduction

The previous decades have seen the birth and meteoric rise of several corporate giants such as Microsoft and Apple, both of which have all but become household names in this day and age. Neither achieved their level of success overnight, especially not since they have long been known to be in direct competition with each other. On the contrary, both of them have had their share of scandals and controversies, which makes the fact of their success even more respectable.

In fact, most companies, regardless of size, will inevitably encounter scandal and controversy at some point in their existence, though this in itself is nothing to worry
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It should boggle the mind just how this was able to happen, given how Enron had been known to have an especially skilled and knowledgeable audit committee. According to Lublin (2002), the committee included such figures as a former accounting professor and dean, presidents and chairmen of both government-owned and private institutions, and was notable for its overall greater competence compared to what one could normally expect from an audit committee. In theory, then, Enron’s audit committee should have been able to prevent or at the very least head off the scandal.

Unfortunately, as Healy et al (2003) pointed out, this turned out not to be the case. For one thing, the committee was said to have made a habit out of meeting for only an hour and a half each time, while cramming way too many topics for discussion into those meetings, resulting in each point not being given the attention and focus it deserved. Not only that, the committee was also unable to properly question auditors on accounting issues concerning Enron’s special purpose entities, as well as the management of Enron itself, thanks in part to the pressure being brought to bear against it.

Eventually, the worst case scenario came to pass. By November 28, 2001, Enron was slated to have at least $23 billion in liabilities borne of outstanding debts and guaranteed loans, with its stock falling to $0.61 at the end of the day’s trading. Only two

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