Review Of Accounting Ethics Current Business And Regulatory Environment

1529 words, 7 pages

Intro Sample...

This assignment will assess whether or not the current business and regulatory environment is more conducive to ethical behavior with the recent ethical corporate breaches. It will also give an overview of Enron, a company that was recently involved in an accounting scandal. It will also review how the ethical breach was recognized and how management failed to create an ethical environment. The impacted accounts and accounting guidelines that were violated will be listed and their impact to the business operation. Finally recommendations will be made on what measures could have been taken to prevent this ethical breach if I was CFO.

Current Business and Regulatory Environment
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Body Sample...

The earnings reports did not give an accurate picture of the company’s true position. The company appeared to be making a lot of money but the executives were embezzling the investments. Investors continued to invest in what they though was a thriving company. This also encouraged new investors to invest (Easy Guide to Understanding ENRON Scandal Summary, 2013). The impact to the organization due to this ethical breach was eventually bankruptcy (Investopedia, 2013). The company reported an astounding 638 million dollar loss in 3rd quarter 2001 which raised many questions (Auerbach, 2013). Investors lost approximately 70 billion dollars and thousands of jobs at ENRON and Arthur Anderson were lost (Easy Guide to Understanding ENRON Scandal Summary, 2013).
How was it detected?
There were several red flags that led to the ethical breaches being revealed. One major red flag was when the then CEO Kenneth Lay announced a major 3rd quarter loss of 638 million dollars. Also, it was notable that Jeffrey Skilling, who had achieved high financial success as CEO, suddenly announced his resignation in August 2001. The Securities and Exchange Commission announced an investigation after several years of questions (Investopedia, 2013). Once the investigation began, Arthur Anderson began destroying documents and deleting computer files. This led to charges of obstruction of justice being brought against them as well (Auerbach, 2013).
Management failed to create an ethical working environment because leadership and high ranking executives including the CEO and CFO did not ...

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