Enron: The Rise and Fall, Movie Review Example

Ethics in Accounting

Arthur Anderson was one of the most prestigious accounting firms in Chicago. However, it fell in a cloud of shame and scandal. It was involved with the cover-up of information on Enron, and at the same time obstructing the federal investigation into the company. The company began valuing heavy fees replacing the good honest bookkeeping that the firm was built on. It broke ethical rules by firing accountants who were not willing to adopt the firm’s new philosophy. Standards were compromised so as to make more profit.

When it was exposed that Enron’s stock prices were less desired, definite aggressive accounting procedures were needed. To make Enron’s shares more favorable, the managerial team depends on an enlarged quantity of new capital, but had to hide the risks to the new financiers. Once Enron started this new type of accounting maneuver, the need to increase this type of dishonesty increased with each financial year. Enron wanted to ensure they kept stirring forward at all costs. At this point, the checks and balances were necessary (Gudinkunst). During this state, management of the company failed to exercise their responsibilities. It was thought the Audit Committee of the Board should have been more cautious of the auditors and their work. As the prices and incomes of stocks were always rising, there was no requirement to scrutinize the internal accounting methods of Enron or the opinion letters of the accounting company.

Enron failed due to corrupt practices by the administration team and all other players failing to perform. Failures are expected in any business, but by laying healthier organizational practices, risks can be reduced. The correct moral code of conduct ought to be followed, and businesses should concentrate on making the employees responsive of the several ethical policies.

In 2002, WorldCom, a big telecommunications company, now known as MCI Inc. was embroiled in a huge scandal. The firm’s assets were found to have been inflated by over $11 billion. This led to the company laying off up to 30,000 workers. Furthermore, investor lost $180 billion. The main player in this scandal was the then CEO Bernie Barnes. He managed to underreport line costs by debiting instead of crediting. He also over quoted the revenues by having numerous counterfeit entries.

That same year, Tyco, a Swiss blue-chip security systems company, had $150 million stolen by the CEO and CFO. This had been achieved by inflating the company’s income by up to $500 million. The two executives executed fraudulent stock sales and unapproved loans from which they siphoned funds. They channelled the money put of the company under the disguise of benefits and executive bonuses.

The Waste Management was a Houston-based company. Its stock was publicly traded. However, it was found that the company had been reporting fake earnings that amounted to $1.7 billion. This scandal involved the Dean Buntrock, the founder/CEO/Chairman. He was assisted by Arthur Andersen, their contracted auditors.

All these accounting ethics breaches underline the importance and roles of the FASB and PCAOB. The PCAOB was created to regulate public accounting firm, ensuring the set rules and regulations are adhered to. The FASB exists to improve financial accounting and reporting. It upholds the best interest of the public and ensures accounting standards are adhered to.

Works Cited

Fox, Loren. Enron: The Rise and Fall. Hoboken: Wiley, 2003. Print.

Gudinkunst, A. Enron-A study of failures, who, how, and why? 2002. Internet Source. 9 April 2014. <Enron-A study of failures, who, how, and why?>.

Robbins, Stephen P and Timothy A Judge. Organizational Behavior. Boston: Pearson, 2013. Print. 8 November 2012. <https://ecampus.phoenix.edu/classroom/ic/classroom.aspx>.

Thomas, William C. “The Rise and Fall of Enron.” Journal of Accountancy – New York 193.4 (2002): 41-52. Print.