Analysis of the Enron/Arthur Anderson Scandal Essay

Analysis of the Enron/Arthur Anderson Scandal Essay

Length: 1550 words (4.4 double-spaced pages)

Rating: Powerful Essays

Open Document

Essay Preview

Enron and Arthur Anderson were both giants in their own industry. Enron, a Texas based company in the energy trading business, was expanding rapidly in both domestic and global markets. Arthur Anderson, LLC. (Anderson), based out of Chicago, was well established as one of the big five accounting firms. But the means by which they achieved this status became questionable and eventually contributed to their demise. Enron used what if often referred to as “creative” accounting methods, this resulted in them posting record breaking earnings. Anderson, who earned substantial audit and consultation fees from Enron, failed to comply with the auditing standards required in their line of work. Investigations and reports have resulted in finger pointing and placing blame, but both companies contributed to one of the most notorious accounting scandals in history. There remains much speculation as to what steps could and should have been taken to protect innocent victims and numerous investors from experiencing the enormous loses that resulted from this scandal.
Accounting Practices at Enron
Unethical accounting practices involving Enron date back to 1987. Enron’s use of creative accounting involved moving profits from one period to another to manipulate earnings. Anderson, Enron’s auditor, investigated and reported these unusual transactions to Enron’s audit committee, but failed to discuss the illegality of the acts (Girioux, 2008). Enron decided the act was immaterial and Anderson went along with their decision. At this point, the auditor’s should have reevaluated their risk assessment of Enron’s internal controls in light of how this matter was handled and the risks Enron was willing to take The history of unethical accounting practic...


... middle of paper ...


...6). Enron and Arthur Andersen: The Case of the Crooked E and the Fallen A. Global Perspectives on Accounting Education: Vol. 3: Iss. 1, Article 3. Retrieved from: http://digitalcommons.bryant.edu/gpae/vol3/iss1/3
Giroux, G. (Winter 2008). What went wrong? Accounting fraud and lessons from the recent scandals. Social Research, 75, 4. p.1205 (34). Retrieved June 16, 2011, from Academic OneFile via Gale:
http://find.galegroup.com.proxy.davenport.edu/gtx/start.do?prodId=AONE&userGroupName=lom_davenportc
Sarbanes-Oxley Act of 2002 (SOX), Pub. L. No. 107-204, 116 Stat. 745 (codified as amended in scattered sections of 15 U.S.C.)
Thomas, C.W. (April, 2002). The rise and fall of enron. When a company looks too good to be true, it usually is. Journal of Accountancy, Retrieved June 15, 2011, from http://www.journalofaccountancy.com/Issues/2002/Apr/TheRiseAndFallOfEnron.htm

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Enron : Enron And Enron Essay examples

- Prior to 2000, Enron was an American energy, commodities and service international company. Enron claimed that revenue is more than 102 millions (Healy & Palepu 2003, p.6). Fortune named Enron “American most innovative company” for six consecutive years (Ehrenberg 2011, paragraph 3). That is the reason why Enron became an admired company before 2000. Unfortunately, most of the net income for the years 1997-2000 is overstated because of unethical accounting errors (Benston & Hartgraves 2002, p. 105)....   [tags: Enron, Enron scandal, Arthur Andersen, Audit]

Powerful Essays
1519 words (4.3 pages)

Essay on Enron : The Fall Of Enron

- The Fall of Enron Kenneth Lay, the CEO of Houston Natural Gas, started a merger with InterNorth, a gas pipeline business, to create Enron in 1985. Kenneth Lay and his partner Richard Kinder set off on creating Enron’s business practices through new projects and investments. However, the company was brand new and not had enough time to become profitable and thus all their investments send them into massive debt. After paying roughly $350 million to Jacobs, another extra from the merger and reorganization, 75% of the company’s capital was equal to its debt....   [tags: Enron, Jeffrey Skilling, Kenneth Lay]

Powerful Essays
1623 words (4.6 pages)

Essay about The Ethics Of Arthur Andersen Llp

- Over the years many companies have decided abandon ethical practices is lieu of higher profits. Because of the high value placed on profits in America, many companies have taken extreme measures to increase profits and increase payouts for shareholders. Arthur Andersen LLP is a prime example of how business executives have been willing to make unethical business decisions in order to please clients and gain an edge on competition. In the short run, these unethical decisions may have seemed beneficial, but in the long run, the extensive consequences of this behavior was not worth any anticipated gain....   [tags: Arthur Andersen, Enron, Business ethics]

Powerful Essays
1396 words (4 pages)

The Case Of Enron 's Failure Essay

- Enron was one of the major energy corporation in America before it went bankrupt. A contributing reason to Enron’s failure was a lack of ethical management. Enron scandal proves that the company infringed the transparency, dignity and responsibility ethical principles of the Global Business Standard Codex (Paine et al. 2005). Effective management practices help businesses manage risk by reducing the likelihood of breaching the misconduct, but ethical dilemmas cause illegal or immoral activities....   [tags: Ethics, Enron, Business ethics, Jeffrey Skilling]

Powerful Essays
1034 words (3 pages)

Enron Corporation : An American Energy Company Essay

- The Enron Corporation was an American energy company that provided natural gas, electricity, and communications to its customers both wholesale and retail globally and in the northwestern United States (Ferrell, et al, 2013). Top executives, prestigious law firms, trusted accounting firms, the largest banks in the finance industry, the board of directors, and other high powered people, all played a part in the biggest most popular scandal that shook the faith of the American people in big business and the stock market with the demise of one of the top Fortune 500 companies that made billions of dollars through illegal and unethical gains (Ferrell, et al, 2013)....   [tags: Enron, Business ethics, Ethics]

Powerful Essays
1339 words (3.8 pages)

Essay on The Enron Scandal

- The Enron Scandal      Enron was established in 1930 as Northern Natural Gas Company and joined with three other companies to undertake this industry. The four companies eventually began to break apart between 1941 and 1947 as a result of a public stock offering. In 1979, Northern Natural Gas was placed under new management when it was bought by InterNorth Inc. In 1985, Kenneth Lay, CEO of Houston Natural Gas Company devised a transaction for InterNorth to purchase Houston Natural Gas. Lay was named CEO of the new company and changed InterNorth's name to Enron Corporation....   [tags: Accounting Business Stocks Market Essays]

Powerful Essays
807 words (2.3 pages)

Auditors ' Motivated Blindness By Arthur Anderson Issuance Of An Unqualified Audit Report

- Auditors’ motivated blindness. It could be that this conflict of interest is the reason behind Arthur Anderson issuance of an unqualified audit report without questioning or recommending to the audit committee the treatment of the related party transactions (Tonge et al., 2003, p. 15), the appropriate disclosures to make or the reasonable assumptions of mark-to market accounting. Moreover, Andersen admitted it destroyed perhaps thousands of documents and electronic files related to the engagement, in accordance with “firm policy,” supposedly before the SEC issued a subpoena for them (Thomas, 2002)....   [tags: Ethics, Business ethics, Enron, Auditor's report]

Powerful Essays
1166 words (3.3 pages)

Essay about Fraud Is The Daughter Of Greed

- “Fraud is the daughter of greed” said British novelist, Jonathan Gash. In the documentary, "Bigger Than Enron," Hedrick Smith discusses how regulatory agencies such as accountants, banks, lawyers, auditors and politicians didn’t try to save such a huge and high-powered corporation as Enron and other companies. Enron was one of America’s largest corporations which was producing electricity, national gas and employed 20,000 people who weren’t aware of what the executives and accountants were doing....   [tags: Enron, Arthur Andersen, Audit, Ethics]

Powerful Essays
1074 words (3.1 pages)

Essay on The Rise and Fall of Energy Giant, Enron

- ... By 2001, the company filed for bankruptcy. This scandal shocked the entire nation. Moreover, it destroyed the financial life of several employees depended on the company. Most of them, who lost their job were nearing their retirement age. They lost all the benefits they earned so far then. Later, the company accepted its failure and agreed on the falsified accounts that profits that the profits were actually balanced out by loss and charges that were not recorded. Fall of stocks: The stock price fell from $90 per share to 26 cents per share in short span of two years....   [tags: ethical, scandal, bankruptcy]

Powerful Essays
1537 words (4.4 pages)

Essay on Enron And The Fall Of The Company

- Enron and the fall of the company Enron was a company that was known by many people and corporation not only in the United States but also around the world. It grew to be one of the largest companies, so as imaged a lot of people were affected by the fall of the company. Over 210000 employees lost there jobs without even knowing what was coming to them and what was going on behind the doors by the people who were running the company. Apart from losing their job, their form of income for their families, they also lost any money that they had invested in shares of the company and their pension funds, because the company encouraged their employees to invest their money in its own shares and...   [tags: Corporate Scandal]

Free Essays
1928 words (5.5 pages)