The Ethics Of Enron And Worldcom - 1821 Words

The desire for money, power, and praise can lead some top executives to participate in unethical behavior to satisfy these needs. Some businesses simply fabricate their financials while others invent fake companies to inflate their asset’s value and profitability. Both situations are attempts to increase their earnings as much as possible for top executives own interests. The two most well-known and fairly recent instances of major accounting scandals include Enron and WorldCom. How did Enron, once one of the five largest audit and accountancy partnerships in the world, and WorldCom, once the United States’ second largest long distance telephone company, both end in bankruptcy just one year after the other? By exploring the history, scandal, and aftermath of Enron and WorldCom, comparing the two business’ malpractice, understanding the ethical issues involved, considering the historical context of the scandal which includes the Sarbanes-Oxley Act of 2002, and my opinion regarding the effect, it will become clear how these once successful businesses ended with criminal charges. Enron Corporation was an American energy and service company based in Houston, Texas. In 1985, Kenneth Lay merged two natural gas pipeline companies, InterNorth and Houston Natural Gas to form Enron. This new company eventually had 36,000 miles of pipe stretching across the United States and into Canada, making it the second largest pipeline network in the United States. By 1992, Enron became theShow MoreRelatedEnron and Worldcom Case Study1225 Words   |  5 PagesEnron and WorldCom Case Study This report is based on the demise of Enron Corporation and WorldCom. Both the firms are demised due to the ethical lapses. These ethical lapses come into existence when managements of the firm, uses unethical practices to accomplish the goals of the firm. Maintaining financial and accounting standards in the business practices are necessary. The profession of accounting has become a mockery due to the accounting scandals that took place all over the world in theRead MoreEssay on The Consequences of Bad Business Decisions1304 Words   |  6 Pagespractices. Once respected businesses like Enron, WorldCom, and Arthur Anderson have been found deceiving there customers, stockholders, and employees. C.E.O.s try to achieve the American dream and pursue capitalism to its fullest potential. In doing so, business leaders have lost their values and ethics, and make bad business decisions. The downfalls of a company are the consequence of C.E.O.s bad decisions. According to Marjaana Kopperi business ethics, can simply be defined in terms of socialRead MoreThe Sarbanes Oxley Act Of 20021133 Words   |  5 Pagesinto customers, the Securities and Exchange Committee proposed and implemented a new law. This policy was put in place to regulate the accounting practices and to make them more honest. Titled the Sarbanes-Oxley Act of 2002 (enacted just after the WorldCom scandal), basically set rules and regulations in place that included (but not limited too): a Public Company Accounting Oversight Board to provide independent justification and to oversee the accounting department; Auditor Independence to limit theRead MoreEnron Questionable Transactions Essay765 Words   |  4 PagesEnron Questionable Transactions Question 1 The question which segment of its operations got Enron into difficulties is simple to answer, everything. Almost every all segments of their operation were improper. First of all, they practice unethical and dishonest practices which victimized workers, consumers, taxpayers and stockholders. Enron created partnerships within their own organization which led to them creating new financial instruments, called SPE’s (special purpose entities) which wasRead MoreThe Sarbanes Oxley Act Of 20021015 Words   |  5 PagesThe Sarbanes-Oxley Act of 2002, also known as the SOX Act, is enacted on July 30, 2002 by Congress as a result of some major accounting frauds such as Enron and WorldCom. The main objective of this act is to recover the investors’ trust in the stock market, and to prevent and detect corporate accounting fraud. I will discuss the background of Sarbanes-Oxley Act, and why it became necessary in the first section of this paper. The second section will be the actà ¢â‚¬â„¢s regulations for the management, externalRead MoreFraud : The Perfect Fraud Storm1420 Words   |  6 PagesFinancial Statement Fraud Option #2 The perfect fraud storm occurred between the years 2000 and 2002 involving two of the largest energy and telecom corporations in the United States: Enron and WorldCom. It was determined that both organizations fraudulently overstated assets, created assets from expenses or overstated revenues, costing investors billions of dollars and resulting in both organizations declaring bankruptcy (Albrecht, Albrecht, Albrecht Zimbelman, 2012). Nine factors contributedRead MoreA Case Of Accounting Fraud1555 Words   |  7 PagesAnother major case of accounting fraud driven by the desire to build and protect one’s personal financial condition is the WorldCom debacle. Bernie Ebbers had to show continually growing net worth in order to avoid margin calls on his own WorldCom stock that he had pledged to secure loans. When WorldCom, the telecommunications giant, failed and was put into bankruptcy, the U.S. witnessed the largest accounting frauds in history. Former CEO, Bernie Ebbers, was convicted of orchestrating this accountingRead MoreThe Sarbanes Oxley ( Sox ) Act Of 20021617 Words   |  7 Pagesbrief historical summary of SOX will be presented, including the events leading up to its passage. The key ethical components of SOX will be identified and explained. The social responsibility implications of the mandatory publication of corporate ethics will be assessed. One of the main criticisms of SOX has been its implementation costs, and this specific criticism will be addressed in regards to smaller organizations. Finally, potential improvements to the SOX legislation will be explored, basedRead MoreThe Enron and Worldcom Scandals875 Words   |  4 PagesE. Boos – Week 2 – Assignment February 17, 2013 The Enron and WoldCom Scandals ENRON 1. The segment of Enron’s operations that got them into difficulties had several parts. They published misleading financial reports. They could not meet their bridge financing commitment with Barclay Bank because outside investors were not found. Because of this, they restated activities of JEDI and Chewco SPEs so they could be retroactively consolidated into Enron’s accounts. The SPEsRead MoreThe, Greed, And Hubris Of Action1236 Words   |  5 Pagescorrupts absolutely†. There were three specific corporate scandals that led to failed confidence in the financial sector and the subsequent legislation known as Sarbanes-Oxley Act of 2002 which attempted to address this malfeasance: Enron, WorldCom, and Arthur Andersen. Enron Notably, the most widely recognized scandal of all time because it led to a systemic lack of trust in corporations and the financial markets in general. Enron’s fraud was twofold; it included complex financial maneuvering through