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مركز كفائخشتس
Enron company
1. American energy
2.
Houston- Texas
3.
between Houston Natural Gas & Inter North
- 29000 staff
good and services
good & services
FOUNDER
FOUNDER
Kenneth Lay
Jeffrey Skilling
vision & mission
Enron's vision is to become the world's leading energy company—creating innovative and efficient energy solutions for growing economies and a better environment worldwide.
Enron, whose mission statement noted that the company prided itself on four key values: respect, integrity, communication and excellence.
the unethical issue
Deceive regulators through manipulating financial data
And evaluation of shares of Internet companies at exaggerated prices
Led to hiding loss
1.
CEO own ways of hiding the company's financial losses. In an accounting method called mark-to-market accounting, he measured the value of paper shop based on their market value instead of their book value
2.
case study analysis
The Enron scandal, exposed in October 2001, what directed to the largest bankruptcy reorganization in American history at that time. In fact, Enron was known as the most famous business in the world, but the company also collapsed down too fast.
There were so many causes led to the Enron’s bankruptcy. First, the absence of the honesty and transparency by administration about the health of the company, followed by the lack of the truthfulness of reporting the company’s financial affairs.
first
Second
Second, the conflicts of interest such independent oversight was virtually nonexistent which is contributed to the company's collapse
Third
Third, as a public company, Enron was subject to the outsources power such as market Supply and demand, the government controlling and regulation, and oversight by private entities
Evidence:
- 1-Fraud and manipulation by the board of Directors to achieve their personal interests at the expense of the interests of the company.
- 2-The deals of the company were reviewed by the Audit Committee within the company. The committee did only a quick review to these deals. The Board of Directors concealed information of great importance that could have led to take some appropriate measures.
- 3-The company's management inflated the company's profits by raising the profit and concealing debts in the year before the company's collapse. The company's internal control also ignored the disclosure of this for ethical reasons.
- 4- The members of the Audit Committee are not independence and neutrality because of the huge amounts they receive from the administration
- 5. The collusion of the Arthur & George office, which reviews the company's lists with the management to hide some deals and pass others in order to maximize profits and reduce losses. The reason for the collusion is the Office gets unreasonable amount of advisory services.
Solutions:
strong culture with honesty, integrity and ethics could have helped avoid the scandal.
If the effective corporate code of conduct were in place and were properly enforced, Enron could have saved itself from the collapse.
Proper disclosures, accountability and transparency could have prevented the problem.
-There should have been some regulations that not enable Enron to hide losses and show fake profits.
It is equally important to create series of checks and balances from both in-house and third party.
conclusion
in the end , many of Enron's executives were charged for insider trading, securities fraud, and conspiracy ,However As a result of the Enron scandal, new regulations and legislation were enacted to expand the accuracy of financial reporting for public companies. One piece of legislation, the Sarbanes–Oxley Act, increased penalties for destroying, altering, or fabricating records in federal investigations or for attempting to defraud shareholders. The act also increased the accountability of auditing firms to remain unbiased and independent of their clients.
- We must always tell the truth whatever it is and commit ourselves to do ethical behavior to avoid serious consequences, also not to avoid the problem or hide it using unethical methods, but .we must try .to solve them in the right way
- The asset price should be carried at book value and not at market price. And the use of accounting principles (GAAP).
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