Enron Corporation Business Law Enron Corporation Describe how Enron could have been structured differently to avoid such activities. Enron could have been aware of the agents are doing to avoid all the scandals that were going on in its company. Enron should have never used its stock value as collateral to obtain loans from its partnership. The partners in the corporation should have known that these techniques were unethical as well as illegal. As stated by Gilman, Hamed, Navran & Brown (2010), the ten things a company can do to avoid being the next Enron includes: Examine your ethical climate and put safeguards in place - Corporations are composed of cultures.
1. Why did accounting fraud occur at WorldCom? There were a number of reasons that led to the occurrence of accounting fraud at WorldCom but the main reason was to boost up the price of the WorldCom stock amid a slowdown in the telecommunications industry. As Bernard J. Ebbers, Chief Executive Officer, declared in 1997, “Our goal is not to capture market share or be global. Our goal is to be the No.
Due to the business having such high risk liabilities it needs to be an entity in and of itself which is what this type of incorporation will allow. The process is quite simple to be incorporated; the proper paper work must be filled with the secretary of state where the business is established. When a business is incorporated as a C-corporation it becomes an entity of itself and no longer is financially tied to the owner/s. The client was very concerned about the many liabilities that the company could possibly face. As a C-corporation the business, not the owner, would be held liable for any financial damages.
Executive Summary Fraudulent financial reporting can have adverse effects on companies, as well as, public confidence in capital markets. This paper examines financial statement fraud and analyzes the financial statement fraud that occurred at Rite Aid in the early 2000’s. The result of Rite Aid’s fraud, as well as many other major accounting scandals, led to the creation of the Sarbanes-Oxley (SOX) Act of 2002. SOX supports the growing need to restore consumer confidence in accounting and reporting practices. Companies want to put their best foot forward when they release financial statements.
Unethical Accounting Practices and the Sarbanes Oxley Act In the wake of scandals involving companies like Enron and World Com, investor’s confidence in the accuracy of a company’s financial statements was shaken. Unethical acts such as providing false information regarding expenses incurred, exaggerating business revenue, or misusing business funds are all reasons the Sarbanes Oxley Act (SOX) was implemented in 2002. Prior to SOX companies were not necessarily accountable for questionable accounting practices and company executives would take advantage of these practices for personal gain. Companies would aggressively estimate expenses occurred or exaggerate revenue to entice investors to invest money or creditors to open lines of credit. In some cases executives would misuse company funds for personal use, such as vacations on company credit cards of use of company planes for private adventures.
In the end, the choice he made was probably the better of the two. He did step down as COB but still pretty much kept his place in authority at B of A. I would, if at all possible, tried my absolute best to avoid having to merge with a company such as Merrill Lynch. The CEO and his colleagues should've done their research and find that out for themselves. 2. I think that the error in decision making came because the CEO didn't know the terrible status of the company.
(INTRO) One of key accounting activities this WorldCom case points out is how WorldCom capitalized leased lines which brought little or no value to the organization, but were accounted as capitalized assets, and the impact this can have on external users. “To maintain and broaden public confidence, members should perform all responsibilities with highest sense of integrity.” (AICPA.com) By capitalizing the costs of these leased lines instead of it would have shown a significantly lower net value of the company. It would have negatively affected cash flows and all the ratios. This activity certainly discredits the profession. It does not offer the fullest disclosure, objectivity, and transparency.
For this reason, the only solution is to have a good risk management plan in place that focuses on the larger threats. So this leads to the question, “what kinds of risks should a company be concerned with?” The author goes on to say that a big part of risk management is understanding the degree of the threat. There are many threats that can bring a company to a complete halt. In the insurance industry for example, anything that prevents the company and its agents from making claims payments, maintaining proper cash reserves, operational risks, financial risks, and especially any risks that involve the IT systems is a threat, because a failure of the systems that keep the company running can be disastrous. Financial institutions such as banks deal with these types of issues on a daily basis because of constant cash flow.
In the business world a well written and highly defined mission statement can be the most important organisational and marketing tool a company can possess. When a business defines its values explicitly, it sets itself apart from its competition and identifies its purpose and image to the client base (Tofftoy and Chatterjee, 2004). Such document also clearly sets out what the company intends to achieve and without being task orientated allows all employees focus on this goal (Dust, 1996). This essay will discuss in detail why it is vital for a business to invest time and resources into explicitly defining its values in a well-executed mission statement. Research shows that the benefits of a highly defined mission statement are plentiful.
Temptations to cheat have increased not only because government deregulation. According Callahan given’s example, “Many of the recent instances of greed and investor betrayal on Wall street, for example, could have been prevented by reforms intended to keep accountants honest—or to ensure the independence of stock analysts, or to stop corporate boards from being packed with cronies, or to keep companies from handing out so many stock options”(21). It shows weaker of deregulation and arracks on government can increase temptation to cheating. But even government didn’t deregulation, people still willing to take high risk to achieve their own goal. People’s temptation is from society.