Soaring rates of compensation is also the other noteworthy cause responsible for the downfall of Enron Corporation. Along with these, defects in the system of management is also liable for the downfall of Enron…
The corporation was formed with the merger between two natural gas pipeline corporations, namely Houstan Natural Gas and Internorth Inc. After the merger, the position and corporate image of Enron Corporation improved by a large extent thereby enhancing its productivity and profitability among others in the market of the US. In the year 1989, Enron Corporation became one of the largest gas suppliers of the United States and United Kingdom (UK) with approximately sixty thousand kilometers of gas pipelines (American-Business, 2011). The prime objective of Enron Corporation was to position itself as an inventive as well as a prominent leader in the sector of natural gas of the US. Apart from these, Enron also extended its services in other sectors namely water, fiber optics, newsprint and telecommunications among others. Enron Corporation was quite succesful in its business operations, as its revenue enhanced approximately from US$ 9 billion in the year of 1995 to about US$ 101 billion in 2000 (Dharan & Bufkins, n.d.). It was as a result of enormous international and domestic expansions but the entire amount was cloaked from the shareholders through affiliations with other concerns (Drennan, 2008). Unfortunately, the brand image of Enron Corporation declined due to planned book-keeping fraud known as ‘Enron scandal’and illegal loans. ...
It may include prevarication or alterations of accounting records in order to attain an illegal financial benefit. Thus, it can be clearly revealed that it is an example of corporate internal fraud as the board members and management of the organisation were entirely involved in this case of conspiracy (Chartered Institute of Management Accountants, 2009). This type of fraud not only hampers organisational distinctiveness but also its culture, employees, ‘corporate social responsibilities’ and ethics. Hence, it can be affirmed that if the pillars of the busuiness are affected then it can not sustain in the long run among others in the market. Thus, it proved rather detrimental for Enron Corporation thereby fading its name from the market of the US. Fraud Conducted in Enron Enron Corporation was regarded as one of the fastest emerging and best controlled business organisations in the market of the US, but it could not retain its corporate image for the long run. The prime reason was due to the accounting scandal which resulted at the end of the year 2001. It was finally revealed that the fraud resulted in deterioration of its financial situations bringing about downfall of position and reliability among others in the market of the US. As a result, customer loyalty as well as market share was also affected to a large extent (IWS, 2002). Due to varied financial discrepancies, Enron Corporation finally filed a bankruptcy case on 2nd December in the year 2001. The prime suspects of Enron’s internal fraud were namely Kenneth Lay, Andrew Faston, Michael Kopper, Jeffrey Skilling, J. Clifford Baxter and Arthur Andersen, among which most of them were the directors of the organisation (Drennan, 2008). The fraud resulted due to the ...
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It is a well recognised fact that for a company to be successful it needs to protect the interest of the stakeholders, employees, internal as well as external customers and the environment in and around the company (Broadley, 2006). Foreign investors feel better in an environment where the basics of the corporate governance is defended and practiced.
The classic example of a big business that went bankrupt because of its fraudulent and unethical business practice is Enron. Enron has interest in providing energy and at some point, became one of the biggest American energy commodities and services from 1985-2001 in American.
The enterprise helped Enron grow its sales by 7 percent per year and its shareholder returns by 27 percent per year between 1988 and 1995 (Best practice and beyond: knowledge strategies 1998, p. 21-22)
A little-noticed but remarkable side effect of this revolutionary development came in the energy sector.
They say that accounting is the language of business. A German investor would be ably informed of how the United States company Kentucky Fried Chicken or any other enterprise has performed in terms of generating profits. The accounting language has its own set of technical words that a person studying basic accounting would easily understand.
It is a rosier picture that what it actually is.
“In October 2000, Enron’s financial cover was blown and the financial house of cards that Andersen helped to create collapsed in five weeks. The implosion of Enron is the largest bankruptcy in American
s a scandal that took place in the business world and it took me longer than usual to understand the gravity of the situation that took place in America.
In my opinion, the government was not expecting too much from the companies in the USA as the event of Enron scandal had
d party auditing firm, it instead entered into a business relationship with Enron that is considered to have a conflict of interest and eventually connived to cover the frauds committed by Enron. The relationship is already wrong at the beginning because Andersen lost its
Taking this aspect into consideration, it can be said that the activities of corporate governance within any business holds a vital position with regard to shaping the reputation of the business within the
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