Rise And Fall Of Enron Essay
Enron’s collapse 2 Enron: What Caused the Ethical Collapse? Enron, a Texas based energy company, has improved the way that electricity and natural gas is purchased ever since its inception in 1985 when its owner, Kenneth Lay, merged his original company called InterNorth with Houston Natural Gas Company. In addition to this, Enron’s growth was attributed to not only the U.S. congress deregulating the sale of natural gas but its selling of electricity at market prices. Even though Enron’s started with natural gas especially shipping natural gas on its pipelines, this company desired larger profits and shifted into electricity trading operations and/or was one of the first energy companies or traders to get into the electricity trading, which started some of its troubles. In light of the fact that electrical traders in Enron involved themselves in schemes to defraud officials running California's power grid, these same electrical traders at Enron drove up prices during the California power crisis through controversial techniques that contributed' to severe power shortages (Isaacs, 2012, Oppel & Gerth, 2002, Brigham & Daves, 2013, Enron-The rise and fall of the Energy Giant, 2011). In fact, Enron, which was once a favorite to investors and an American energy company had filed the hugest corporate bankruptcy because of the major events that led to the eventual collapse of this corporation, the ways the top leadership at this company undermined the foundation values of its own Code of Ethics, and the unethical decisions and actions that were promoted by its corporate culture. Firstly, there were many causes that led to the eventual collapse of Enron especially under Kenneth Lay, Jeffrey Skilling, Andrew S. Fastow, and other top-level officers. For instance, not only the fraudulent or deceitful activities that were orchestrated by Lay, Skilling, and Fastow, but also the company’s criminal and dishonest corporate culture caused the eventual collapse of Enron. In fact, the violation of laws that were not enforced or applied by the chair,
The Enron scandal was one of the largest corporate bankruptcies that the world witnessed in 2001 and it led to the complete fall of Enron Corporation, a large energy based company in America. The devastating effect of the Enron Scandal can be accounted from the simultaneous dissolution of Enron’s accounting partner, Arthur Andersen LLP which was one of the Big Five accounting and auditing firms. The magnitude of the fraud in this case can be easily understood by the subsequent formulation of the Sarbanes-Oxley Act by the U.S. Congress in 2002 that ensured the security of the investors from such fraudulent accounting practices by the companies. In this case study I analysed the causes of its downfall and the role of accounting professionals in the demise of the company. Before going into the depth of the case I evaluated the corporate governance and the issues and challenges that the company were facing at that time. Deductive approach was used for analysing the concerned theme of research wherein the aim of the report helped in designing the research direction. I conducted an intensive study of the case to highlight the failures of internal and external checks i.e. the accounting regulations and auditors in detecting the fraud practices of the company. In this paper I have also provided a picture of corporate culture of Enron and the violations of the company’s code of conducts by its leaders. Lastly, my research on the case concludes with the lessons that should be learnt to prevent such corporate scandals reappear in future.
THE RISE AND FALL OF ENRON: A CASE STUDY