Similarly, in financial studies reporting plays a very important part not only to the company’s point of view but also from the point of view of public and investors. So financial reporting is actually a very important matter not only for the companies who develop the reports and send them out, but in fact also for the investors, consumers, business partners, competitors, other agencies as well as general public who read the reports and analyze it to make their decisions. With the help of financial statements in these reports a company actually represents their performance to the stakeholders. They do not only tell their activities and philosophies in detail but also explain the vision and future plans as well. At the same time they try to enhance their reputation as well. And lastly but most importantly the managers show accountability of their work and decisions to the stakeholders through these financial reports. So if the reporting by these companies is not accurate a lot of such decisions can become wrong. As all the stakeholders of the company rely on these reports to forecast the performance of company and for answering their questions like what and how they will be performing in future. This case is actually termed as the distinguishing point of entirely new era of ethics in financial reporting. Before the Enron case, there were no such laws related to financial reporting and internal and external auditing etc. But the Enron case raised the importance in making ethics necessary in this field as well, but it also enabled the development of regulatory bodies that enforced the ethical practices in the financial reporting as well. Before the Enron’s scandal, there was very little, in fact no public attention on the truthfulness of the financial reports published by the companies. Yet people have suspicions about misrepresentation but mostly didn’t affect the decision making of public and did not indulge them on deep research and analysis. But after the Enron case, it became necessary that these reports should be certified by some public accountant who would ensure that whatever information is presented in financial reports are truthful and these statements must represent the true picture of the company. So this scandal played a vital role in the legal development of laws in the field of financial reporting and auditing. Further, it gave rise to the ethical role of management for providing the public the information based on truth. ENRON’S CORPORATE CULTURE: Enron gained a lot of popularity in the 90s due to its extra ordinary earnings and its name was listed in the Fortune 500 companies. Their management felt proud of their performance and considered them the best in the industry. The management and executives believed that they are leading by a very big lead from their competitors and that their competitors have no chance to even come near their performance standards. They were so proud of their performance that they did not fear to take any degree of risk for their projects as they believed that they can handle it easily. The executives took the meetings easy and the focus of top management was on how to generate more money for the executives in spite of how they can
Case Study Analysis: Enron: Questionable Accounting Leads to The Collapse [N a m e] [Course][Class] [Professor] [Date] INTRODUCTION: As the world enters into the twentieth first century, many experts think that a new era of business world has dawned in which companies not only have to create targets for their product and services but also need to adopt entirely new concept in their mission, purpose, vision, implementation and conduct, through the implementation and practice of Ethics on the organizational scale…
The concept of earning management generally has been at the centre of these scandals. The accounting literature abounds in the various means of earnings management, which is an accounting procedure of hiding actual financial performance of corporations from those stakeholders who have a right to know the actual business position (Habbash, 2010).
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The paper starts with a strong thesis statement as the author of the book and other materials bring forward. Secondly, the paper will critically discuss the reasons as to why the societies collapsed and then, the paper will provide
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