Enron Scandal

1844 Words Oct 9th, 2014 8 Pages
THE ENRON SCANDAL
FACTS OF THE CASE
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Enron 's predecessor was the Northern Natural Gas Company, which was formed during 1932, in Omaha, Nebraska. It was reorganized during 1979 as the main subsidiary of a holding company, Inter-North which was a diversified energy and energy related products company. During 1985, it bought the smaller and less diversified Houston Natural Gas company.
> Employed approximately 20,000 staff
> One of the world 's major electricity, natural gas, communications, and pulp and paper companies.
> Revenues of nearly $40.1 billion.
Enron was almost universally considered one of the country 's most innovative
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PROBLEMS OF THE CASE
1. The need for significant reforms in accounting and corporate governance in the United States, as well as for a close look at the ethical quality of the culture of business generally and of business corporations in the United States.
2. A private company like Enron currently hires and pays its own auditors. This again is a conflict of interest built into our legal system because the auditor has an incentive not to issue an unfavorable report on the company that is paying him or her.

ALTERNATIVE COURSES OF ACTIONS
1. Current laws and SEC regulations must not allow firms like Arthur Andersen to provide consulting services to a company and then turn around and provide the audited report about the financial results of these consulting activities.
2. And if the first ACA is not applicable, the company should have better financial disclosure mechanisms. Expense claims should be processed properly with an allocated time to properly check the finances and expenses. This is to correctly audit and make a balance sheet to show where the money was used and to check the profits of the company. And not for the staff to make poor performances. And also separate auditing from consulting functions.

THE BEST ALTERNATIVE COURSES OF ACTION
The best solution for this Scandal was the ACA 2. The company should have better financial disclosure mechanisms. Expense claims should be processed properly with an allocated time to properly

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