International Business Ethics Cases ENRON SCANDAL

International Business
Ethics Cases
ENRON SCANDAL

                      In the year 2001, this is a year that marked as the national scandal in the history of the world, The bankruptcy of the famous Enron Corporation, that is the power house of the energy resources such as natural gases, electricity, commodities, boardband services and etc. But the fall of the Enron Corp. also led to the fall of the mighty Arthur and Andersen ( One Of the Big Five in the Auditing firm in the world ). 

    

        Let's discuss a brief history of the two companies, Firstly, Enron Corp was the was an energy, commodities, and services company that was based in Houston, Texas. According to wikipedia, Enron employed approximately 20,000 staff and was one of the world's major energy resources companies, with  revenues of nearly $101 billion during the year 2000. Fortune also named Enron "America's Most Innovative Company" for 6 consecutive years. 

        Secondly the Arthur & Andersen, formerly known as the one of the five biggest auditing firm inthe world, providing auditing, tax, and consulting services to large corporations, headquarter in Chicago and claimed up to US$9.3 billion in the year 2002. 

        Let's get down the main thing, what's the purpose for this ? Enron is once the superpower industry in the world, but the fall of Enron Corp changed the world, the Ethics is seems to be an important thing in business, in most of the Business Ethic courses we learnt about this case, the roots of unethical action by Enron is that the organization culture emphasize greed and self-dealing to themselves and their own families.

The former CEO CEO Kenneth Lay made sure his own family benefited from the Corp. 

         

           That's just the saying in ethics but in another view, According to wikipedia in this case, Enron's complex financial statements were confusing to shareholders and analysts. In addition, its complex business model and unethical practices required that the company use accounting limitations to misrepresent earnings and modify the balance sheet to indicate favorable performance. Enron's also commit a few accounting scandal. As CEO Jeff Skilling made a lot of error in the financial reporting to misleaded all the stock investor and stakeholders, they used the Mark-To-Market accounting method that income is estimated as the present value of net future cash flow due to the large discrepancies of attempting to match profits and cash, investors were typically given false or misleading reports. Secondly, Enron used special purpose entities or limited partnerships or companies created to fulfill a temporary or specific purpose or we call it Shell firms. 

       From all these mistakes and fraud that made by the Enron corp, On December of 2001, Enron Corp was demised and Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Not only that the alleged by Arthur & Andersen also voluntarily surrendered its licenses to practice as CPA in the United States after being found guilty of criminal charges relating to the firm's handling of the auditing of Enron Corp. 

    

       From the history made in 2001, business ethics is matters, and it is vital to make a company gain long term operating and profit. Misleading information by creating misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets or in another terms "Creative Accounting". 

        Aftermath in the USA was crucial a new act called the Sarbanes–Oxley Act of 2002  to enforce on this scandal was enforced to ensure the accuracy of Financial reporting standards. Ethics concern an individual's moral judgements about right and wrong. As a business owners business ethics must be implemented.