Enron

750 WordsJul 11, 20143 Pages
Enron: Ethics and Auditing Gone Wrong Enron was once a promising company headed toward greatness but all of this was just for show and thus not long enough; it was discovered that one of the world’s most admired companies was just faking all their records taking down a lot of investors of their company to bankruptcy as well as their employees. The Enron scandal has paved the way not only to America’s consciousness on risks involved on how corporations work, but how stakeholders can be victimized by fraud if corporations are not properly audited and regulated. It also opened consciousness of the whole world as well. In this paper, we will take a look on how proper implementation of business ethics and auditing can help avoid tragedies…show more content…
During this time, Enron was ranked as the most innovative American company in Fortune magazine’s survey of Most Admired Companies (2). While the stocks are rising, the executives cash-in their option in a process known as “pump and dump” (1). Heavy PR campaigns are also made to project profitable and stable business operations despite the fact that the actual performance of the business worldwide is crumbling. Fall of Enron To enforce his directives, Skilling hired people known as the “guys with spikes” within Enron. Unfortunately these leaders had personal issues as well coming in the mix. J. Clifford Baxter who is assigned as an executive is manic-depressive; Lou Pai, CEO of Enron Energy Services on the other hand notoriously uses shareholder’s money visiting strip clubs. Lou Pai resigns making $250MM after he sold his stocks despite the fact that the divisions he led lost $1 billion (the loss is covered by Enron). Enron’s competitive advantage, as well as its huge profit margins, had begun to erode by the end of 2000. Energy prices began to fall in the first quarter of 2001 and the world economy headed into a recession, thus dampening energy market unpredictability and reducing the opportunity for the large, rapid trading gains that had formerly made Enron so profitable. (1). Enron’s foundations were developing cracks and Skilling’s house of paper built on the stilts of trust had started to crumble and eventually was

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