Enron Essays

The Sarbanes Oxley Act

The Sarbanes-Oxley Act of 2002, often abbreviated as SOX, is a legislative act passed by Congress in response to the Enron and WorldCom financial scandals. The primary purpose of SOX is to protect shareholders from errors or fraudulent reporting by the company they have invested in. The Sarbanes-Oxley act is enforced by the Securities and Exchange Commission, a department dedicated to ensuring compliance to SOX from all firms, and is also responsible for revising provisions of the act in order…

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Internal Accountant’s Report to Management

Introduction Since our company is preparing for an upcoming government contract bid, management has decided that a full Financial Status Review (FSR) prior to the release of the bid is essential. This report is to provide supporting information prior to the bid in order to evaluate if any irregularities with regard to fraud and/or abuse of the company have taken place and if so, to what effect. The report is divided into four sections, which will cover information on the…

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Key Stakeholders

Question 1: Who were the key stakeholders involved in, or affected by, the collapse of Enron? How and to what degree were they hurt or helped by the actions of Enron management? Answer: Enron’s board was made up of 17 members. Out of 17, 15 were outsiders and only 2 were insiders. These two key stakeholders were insiders of Enron named Kenneth L. Lay (Enron CEO) and Jeffrey Skilling (President & Enron COO). They were helped my Enron management in…

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Corporate Governance Mechanism

Executive Summary This paper will reviews the extent to which corporate governance acts as efficient tool to protect investors against corporate fraud, thus contributing to summarize the literatures on role of corporate governance on preventing occurrence of corporate fraud. In a more recent study, corporate fraud is part of earnings manipulation done outside the law and standards. Whereas, the activities covered by the terms earnings management (such as income smoothing and big bath) and creative accounting (or window dressing) normally…

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The Case Study of Enron

Introduction Reputational risk is damage to the value of a company’s brand name caused by negative public opinion. It can happen for a number of reasons such as directors maximize self interest which have a debilitating effect on shareholder wealth and value of the company (Wise Geek). Large companies always have a strong concern on establishing and maintaining its good name. Hundreds of millions of dollars have spent on “image advertising”. When a company got a positive reputation, it may…

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Enron and Corporate Ethics

On December 2, 2001, Enron Corporation, then the seventh largest publicly traded corporation in the United States, declared bankruptcy. That bankruptcy saw thousands of Enron employees and shareholders losing their jobs and their investments. Enron’s fall sent shockwaves to all corners of the business world. A Fortune 400 company with all the appearances of stability and corporate soundness, the company’s collapse was unthinkable. For here was a company who grew by leaps and bounds in so short a time –…

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External Causes for Enron to Collapse

1) Deregulation Deregulation of the U.S. energy industry made possible Enron’s emergence as a major corporation, but also ultimately may have contributed to its collapse. The company successfully seized the opportunity created by deregulation to create a new business as a market maker in natural gas and other commodities. Enron successfully influenced policymakers to exempt the company from various regulatory rules, for example in the field of energy derivatives. This allowed Enron to enter various trading markets with virtually no…

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Enron and Worldcom Scandals

1. Which segment of its operations got Enron into difficulties? The guaranteed loans that were intended to bridge the financing for investments from outside investors that could not be found would be the segment of operations that caused Enron difficulties. 2. Did Enron’s directors understand how profits were being made in this segment? Why or why not? Enron’s directors did not understand how profits were being made in this segment because they were kept out of the loop of everything…

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Enron Corporation

I   The Beginning When Enron Corporation declared a Chapter 11 bankruptcy in December 2001, it left the public especially its investors and stockholders reeling from such financial scandal and collapse.  Enron had allegedly overstated its profits by $586 million since 1997 in order to protect the firm’s balance sheet and practiced insider trading as well fraud and conspiracy. Enron had been the seventh largest company in the United States and had been one of the largest financial contributors to the…

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Enron Ethics

This article tries to show how the company’s culture had profound effects on the ethics of its employee? And particularly in this case: how did Enron lose both its economical and ethical status? This question makes the Enron case interesting to us as business ethicists. Enron ethics means that business ethics is a question of organizational “deep” culture rather than of cultural artifacts like ethics codes, ethics officers and the like. BackgroundAt the beginning Enron faced a number of financially…

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Enron Accounting Fault

Enron is frequently given as an example of creative accounting. It is also given as a good example of accounting fraud and insider trading. This is a good example of creative accounting taken too far – not many would disagree that it was accounting fraud, although some would say they were just unlucky to get caught. after all, the auditors were Arthur Anderson, at the time one of the most respected auditing firms. Creative Accounting – Example 1 – Creating…

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Primer on the Sarbanes Oxley Act 2002

In the beginning years of the new century a series of huge corporate frauds predominated the business sections and front pages of dominant newspapers, shaking public confidence in the integrity of corporate America. Those scandals also raise serious questions about the integrity, acuity and prudence of business leaders and accountants who structure and document business transactions, approve required financial disclosures, and, in the case of accountants, certify the accuracy of required reports (Enrione, Mazza, & Zerboni, 2006). Congress responded by…

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Arthur Anderson Questionable Accounting Practices_ Ethics and Advocacy

1. Discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted in 1999. The provisions of Sarbanes-Oxley Act help minimize the likelihood of auditor failing to identify accounting irregularities by the following requirements: 1). Improving the internal control. Auditors comment on the internal control of the firm should be reported. 2). Reinforcing supervision for financial irregularities. This act boosts to establish an independent the Public Company Accounting Oversight Board,…

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Ethical Observations

Unethical accounting behavior and the resulting practices of it within businesses today is a very hot topic since the Enron accounting scandal of 2001. One might ask how does a scandal of this proportion come to be and can it happen again? What situations could lead to unethical behaviors and practices in accounting today that might cause history to repeat itself? The author intends to answer these questions and shed light on some insight of accounting ethics today. By the…

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Enron

Enron is the story of the largest bankruptcy in the history of the United States. Through a variety of accounting tricks relating to partnerships, the company was able to inflate its profit and lower its debt. Enron executives earned millions through these partnerships and by selling stock before its demise while employees lost pension plans and retirement funds and stockholders lost value. In 1985, the merger of Houston Natural Gas and InterNorth of Omaha, Nebraska formed Enron Corp. Enron began…

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