Enron Scandal Essay

1211 WordsJun 6, 20115 Pages
Ethics Report: Enron Scandal Business ethics generally result from an individual's own moral standards in the context of the political and cultural environment in which the organization is operating. There is a whole separate debate, of course, on which macro-economic system works best to deliver good corporate ethics and governance - especially currently after what some would argue as a failure in the capitalist model (regardless of your views it is clearly undergoing the most significant trauma for nearly a century). In October 2001, the Enron scandal was publicized, which eventually led to the bankruptcy of the Enron Corporation and the conclusion of Arthur Andersen. Arthur Andersen was one of the five chief audit and accountancy partnerships globally. Enron was an American energy company based in Houston, Texas (Ayala & Giancarlo 2006). Not only was this one of the most prevalent bankruptcy reorganization in American history at that time, Enron indisputably was the biggest audit catastrophe. Enron started in 1985 by Kenneth Lay after assimilation of Houston Natural Gas and InterNorth. Numerous years later, Jeffrey Skilling was employed. He industrialized a body of executives that used accounting loopholes, special purpose entities, and poor financial reporting, to veil billions in debt from unsuccessful deals and projects (Bratton, 2003). Chief Financial Officer Andrew Fastow and other executives were able to deceive Enron's board of directors and audit committee regarding breach on accounting ethics as well as pressure Andersen to overlook the issues (McLean & Elkind 2003). By 1992, Enron was the largest merchant of natural gas in North America, and the gas trading business became the second largest contributor to Enron's net income, with earnings before interest and taxes of $122 million. The creation of the online trading model,

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