Essay on Ethics And Enron

1901 Words 8 Pages
ENRON
Introduction
Enron was the country’s largest trader and marketer for electric and natural gas energy. Its core business was buying energy at a negotiated price and later, selling the energy when prices increased. As an energy broker, Enron provided a service by allowing producers to negotiate a certain price while Enron took the risk that prices would fall below what it bought energy. Buyers of energy also benefited because Enron could ensure the supply of energy. In 2000 Enron was listed number five on the Fortune 500. What happened to the company which was among the most admired for vision and quality thinking? Enron was the company that held virtual assets and not the real assets, such as power stations, which were capital
…show more content…
These promises changed the position of Merrill Lynch from equity to debt. But Enron showed it as cash income and did not show that amount was really a loan to be repaid. Enron was not legally required to reflect any of its debt of the SPE (Bohlman, 2005).
World Com
Introduction
WorldCom, now named MCI, recently emerged from bankruptcy protection after reporting accounting irregularities of $11 billion. During the late 1990s there was formidable pressure on WorldCom to preserve historic levels of cash flow and EBIDTA (earnings before interest, depreciation, taxes, and amortization) while new telecommunications orders were in decline as well as continued pressure on existing price points. It was during this period that WorldCom began many of the fraudulent accounting practices. The SEC Report (2003) on WorldCom identified fraudulent behavior in three main areas: the unauthorized movement of line costs to capital resulting in decreased expenses, the improper release of accruals reducing current expenses, and questionable revenue entries producing an increase to earnings. These accounting irregularities have resulted in many of WorldCom's previous executives being prosecuted on securities’ charges. As part of emergence settlement, MCI paid the Securities and Exchange Commission (SEC) fines totaling $750 million and former bondholders received 36 cents on the dollar in stock in the new company (Scharff, 2005).
Open Document