Enron's Collapse and Ethical Framework Term Paper

A look at the accounting scandal at Enron.
# 150452 | 2,102 words | 14 sources | APA | 2012 | PK
Published on Feb 17, 2012 in Business (Accounting) , Business (Companies) , Accounting (Fraud)


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Description:

This paper presents an overview of the scandal and collapse of Enron, focusing on its unethical accounting practices. First, the paper describes how Enron became entangled in using the mark-to-market valuation accounting for evaluating Enron's assets. It further points out the weaknesses and flaws in this system. Then, the paper discusses how shareholders were misled because this system did not accurately reflect investment values at Enron. Next, the paper highlights the Sarbanes-Oxley Act 2002, a federal business law that was passed to prevent future accounting scandals like those of Enron, Tyco International and WorldCom. Finally, the paper addresses international initiatives that were created to avoid other situations such as Enron, focusing on the Corporate Law Economic Reform Program was established in Australia which was considered as equivalent to SOX (Sarbanes-Oxley Act of America). The paper concludes by evaluating the impact of Enron's collapse on various stakeholders and its meaning regarding ethical issues that are prevailing in the business world.

From the Paper:

"This is an example of an open violation of truth and trust. Investors usually select the board of directors to make the long term policy for them. Directors hire managers to run the business for them. This shows divorce of ownership and control. This means that owners are not directly controlling the business, but they entrust it to their people selected in the Annual General Meeting. These people than entrust the responsibility of day to day operations to managers. In this way, there is a series of trust contract being formed. Ethics of any action require that trust should not be betrayed and whatever happens truth should be told to the real owners who have trusted the directors with their responsibility. The first breach of trust in Enron case started when the directors started sending misleading reports to the owners to make the financial statements of Enron look healthy. This is open violation of truth and trust and shows that in the case of Enron there was a clear evidence of breach of trust. Another problem in this case is the abuse of powers from directors. They started a new system of accounting and started fooling the real owners. Hence, all the theories of ethics reject such kind of actions."

Sample of Sources Used:

  • Velasquez, M. (2005). Business Ethics: Concepts and Cases. Prentice Hall
  • Key, D (2002). Perceived Managerial Discretion. Entrepreneur Journal. Retrieved on 23 August 2011 http://www.entrepreneur.com/money/index.htmls
  • Salaiman, S.M. (2011). The Enron Collapse and Criminal Liabilities of Auditors and Lawyers for defective prospectuses in the United States, Australia and Canada. Retrieved on 23 August 2011.http://jlc.law.pitt.edu/articles/26/Solaiman.pdf
  • Fass, A. (2007). One Year Late, the Impact of Sarbanes-Oxley. Forbes. Retrieved on 23 August 2011. http://www.forbes.com/2003/07/22/cz_af_0722sarbanes.html
  • Bumgardener, L. (2003). Reforming Corporate America. Graziadio Business Review. [ejorunal] 6(1). Retrieved from http://gbr.pepperdine.edu/2010/08/reforming-corporate-america/

Cite this Term Paper:

APA Format

Enron's Collapse and Ethical Framework (2012, February 17) Retrieved August 08, 2022, from https://www.academon.com/term-paper/enron-collapse-and-ethical-framework-150452/

MLA Format

"Enron's Collapse and Ethical Framework" 17 February 2012. Web. 08 August. 2022. <https://www.academon.com/term-paper/enron-collapse-and-ethical-framework-150452/>

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