Essay On Organizational Changes Post Enron

Without a question the BOD should have placed a high degree of reliance on Andersen, which at the time was one of the most prestigious worldwide accounting firms. The auditors should have known the kind of accounting taking place in Enron. In my opinion, Andersen knew, at least to some extent, the company’s financial condition. However, Enron was already too deep under water that blowing the whistle so late would have created problems for Andersen as well. According to the case, on 02/05/01, Andersen held internal meeting during which it addressed the company’s accounting from and oversight of the LJM partnership. Andersen never discussed these concerns with the Audit and Compliance Committee. Although the BOD has its faults, it should have been able to rely on Andersen’s work.

This event was unprecedented. The seventh largest company in the United States disintegrated from an annually profitable company in business for over sixteen years to a company claiming to be bankrupt over a period of a few months (O’Leary). Ultimately, fraudulent accounting and misstatements of revenues and debt obligations orchestrated by the CEO, CFO, and other senior managers were to blame. These revelations roiled stakeholder trust in public companies' financial reporting, accounting methodology, and overall transparency. In addition to Enron’s admissions, their accountant and auditor, Arthur Andersen LLP, was determined to have conspired to assist in the inflation of stated profits mainly by not disclosing Enron's money-losing partnerships in the financial statements (PBS). Arthur Andersen eventually surrendered the practices’ CPA licenses in the United States after being found guilty of criminal charges relating to the firm's handling of auditing for Enron

Before 2002, shocking scandals in the stock markets generated substantial losses to investors and, for a time, the United States economy was in near chaos. Enough evidence of impropriety, financial statements, market analysts, politicians and company executives, emerged to increase investor skepticism for a long time (Larson, Thompson and Walters, 2004). The primary focus of this problem was the concerns regarding the ethical behavior of business enterprises and the effectiveness of accounting and auditing norms (Larson et al. 2004). The Sarbanes-Oxley Act of 2002 was signed into law by President George W. Bush to enhance the public's confidence in the accounting profession (Larson et al., 2004). This Act, considered one of the most noteworthy

Not only was Enron a huge scandal at the time but also now WorldCom was coming into the picture, with this the public questioned as to how corporations were being governed (Welch. M. (2006)). In the wake of these scandals something major needed to happen to prevent any more corruption to occur. Both the Senate and the House in the summer of 2002 passed Sarbanes-Oxley Act with popular vote (Bumgardner.L. (2003)). After the Act was passed it called for changes in how companies run. Companies really had to look at how the roles of the companies’ top associates were going to change. Now when a company sends out financial statements, the managers of the company have to take ownership that the information being presented to the public and shareholders is correct. This can put an enormous amount of pressure on the company to report accurate numbers as to how the company is preforming, without Sarbanes-Oxley this would of never happened. Companies would not have to take ownership of what is being shared with the public and shareholder. Also now a clear picture is show as to how a company is truly preforming. It can be said that this is a

The fall of the colossal entity called Enron has forever changed the level of trust that the American public holds for large corporations. The wake of devastation caused by this and other recent corporate financial scandals has brought about a web of new reforms and regulations such as the Sarbanes-Oxley Act, which was signed into law on July 30th, 2002. We are forced to ask ourselves if it will happen again. This essay will examine the collapse of Enron and detail the main causes behind this embarrassing stain of American history.

Audit planning details change from client to client, no matter the complications presented. Each evolution of society’s business world prompts rule makers to update authoritative accounting standards in order to allow for changes, auditors are then responsible to certify their client’s financial reports adhere within compliance according to current authoritative standards. Many cite the Sarbanes-Oxley Act (SOX) of 2002 as being legislation that has had the most profound impact on the auditing profession; incidentally, an auditor’s job is to certify financial statements are a fair representation of a company’s financial position, at a given point in time, using current acceptable standards. Society deems auditors as gatekeepers and expects the auditing profession to find and report fraud, prevent fraud, and make certain financial statements are true, fair representation of a company’s financial position. Even though the rules, regulations, and generally accepted accounting principles can sometimes be difficult to find and translate, the public expects auditors to prevent events such as those that sparked SOX. The Financial Accounting Standards Board (FASB) developed the Accounting Standards Codification (ASC) that became the authoritative source July 2009 (FASB, 2009). Perhaps the hardest impact auditors experience with FASB ASC is attempting to ascertain clients’ FASB ASC references in disclosures on financial statements; “management cannot delegate this function to the

Enron Corporation was an American energy trading company who committed the largest audit fraud alongside Arthur Andersen and filed for one of the largest bankruptcies in history in 2001 after producing false numbers and committing fraud for years (“Enron’s Questionable Transactions” page 93). Enron failed to run an ethical business in multiple aspects. The executives of the company abused their powers by having board members not properly oversee its employees. Enron committed accounting malpractice by producing false financial reports to hide the debt from failed projects and deals. Using a mark-to-market accounting method, Enron would create assets and claim the projected profit for the books immediately even if the company had not made any profit yet. In order to hide its failures, rather than reporting their loss, they would transfer the loss to an off-the-books account, ultimately leading the loss to go unreported. Along with Enron hiding losses and creating false profit for the

During the decline of Enron and WorldCom ignorance existed and was better professed by Enron CEO Jeffrey skilling who claimed in congressional testimony that, “I’m not an accountant” (2012). Statements such as these lead to the development of The Sarbanese-Oxley Act of 2002. The Enron executives pursued multiple deceitful actions such as fictitious sale along with bogus revenue streams, concealed losses, inflated inventories and manufacture phony profits. Post 2002, The Sarbanese-Oxley Act addressed many of these issues by furthering audition standard that were previously unheard of. Let’s face it as Denny Beresford, former Financial Accounting Standards Board chairman, who was named to the board of directors of WorldCom Inc. Stated that,

The accounting profession has been ridiculed by the corporate scandals that took place in the last

On December 2001 Enron, a successful American energy company, was filed for bankruptcy. It was held that what led to the bankruptcy was, among other things, the lack of transparency in the functions of auditing and accounting. This is why, in July 2002 was adopted the Sarbanes-Oxley Act, with the aim to overcome these directorship and accountability weaknesses.

Even though a considerable amount of the regulation regarding corporate ethics and acquiescence is fixated on financial procedures, organizations still need to give attention to nonfinancial parts of its operation in order to maintain its integrity (Ferrell, et al., 2013). In other words, an organization need to have balance in relation to its overall ethical perspective, focusing on both ethical financial decisions and ethical in its corporate culture (Ferrell, et al., 2013). Although the “Sarbanes–Oxley Act” place emphasis on problematic accounting and the versification that devastated shareholder worth, however there are

Ethics is a decision one makes in knowing the right thing to do and actually doing the right thing. They are the rules of behavior based on one’s belief of what is morally good and bad. A person may hear the word ethics and immediately think of government or the law. Not only does ethics have a role in government, it also plays a major role in business, including accounting. Schroeder, Clark & Cathey (2014) state that the “reason for a high level of ethical conduct is the need for public confidence in the quality of services provided by the profession” (pg. 624). Ethical conduct not only encourages a high standard of performance; it also encourages a high quality of professional

This accounting system considers current market value for assets and liabilities rather than its book value. The market value for Enron’s stock, assets and liabilities were small but the management showed higher market value and huge profits, raising market share value and deceiving their investors, shareholders and other entities that had investments in Enron. Enron executives were highly qualified from business schools holding degrees from schools like Harvard and Stanford and with decades of experiences under their belt. But that didn’t stop them from making unethical decisions. They involved everybody surrounding them from energy traders to accounting firms. The public accounting firm “Arthur Anderson” who was performing audits and producing audited financial statements was also involved in the series of fraud by signing off on Enron’s unreliable financial statements and taking million dollars a week from Enron. The law firm Vincent and Akins roughly made one million dollars a week as well by guaranteeing the business operations and frauds as being ethical for Enron. They knew what they were doing but money had blind folded them. The profits showed in the audited financial statements were deceiving which led stock holders and others investors attract to invest more in the company. Executives made Special-purpose entities [subsidiary entities to Enron] to

Ethics is something that is very important to have especially in the business world. Ethics is the unwritten laws or rules defined by human nature; ethics is something people encounter as a child learning the differences between right and wrong. In 2001, Enron was the fifth largest company on the Fortune 500. Enron was also the market leader in energy production, distribution, and trading. However, Enron's unethical accounting practices have left the company in joint chapter 11 bankruptcy. This bankruptcy has caused many problems among many individuals. Enron's employees and retirees are suffering because of the bankruptcy. Wall Street and investors have taken a major downturn do to the company's unethical practices. Enron's competitors

The case of Enron Corporation and Andersen, LLP can be noted as one of the most infamous fraud scandals in US history. Investors lost millions of dollars and ruined the public’s trust. Enron was once the seventh largest public company in the United States and Andersen LLP was the world’s largest and most respected business organizations. Enron’s stock prices soared to approximately $100 to less than $10 in 2001. How did these two big giants fall into oblivion and what could have been done to avoid the disaster of these companies?