It is commonly know that the ever increasing number of frauds has lessened the trustworthiness of financial reports, destroyed the confidence of investors with respect to the reliability of financial reports and has also contributed to some economic losses. Corporate financial scandals are becoming more frequent and complex. One of the most famous corporate financial scandals is that of Enron. Enron has been acknowledged to be one of the largest bankruptcy and biggest audit failure in US history
principles have been violated as a result of this scandal? Explain the nature of each violation. Ethics is a set of moral principles or values. (Arens, Elder, Beasley, & Splettstoesser). In the Enron scandal violated many ethical policies. The policies which were violated are trustworthiness, citizen and responsibility. Trustworthiness- Enron was not being honest and reliable with their stakeholders for an example Enron misinterpreted their financial statements and they did not show the company liabilities
Nakayama: What do you think are the most important lessons to be learned from the Enron scandal? Hanson: The Enron scandal is the most significant corporate collapse in the United States since the failure of many savings and loan banks during the 1980s. This scandal demonstrates the need for significant reforms in accounting and corporate governance in the United States, as well as for a close look at the ethical quality of the culture of business generally and of business corporations in the United
STRATEGY 1: UNDERSTAND THE CULTURE AND DYNAMICS OF CONFLICT The company Enron was formed in 1985 after two natural gas companies, Houston Natural Gas and InterNorth merged together. Kenneth Lay, former chief executive officer of Houston Natural Gas was named CEO of Enron and a year later, Lay was assigned to the chairman of Enron. A few years later, Enron launched a website to allow customers to buy stock for Enron, making it the largest business site in the world. The growth of Enron was rapid;
Appendix 1 Enron scandal Enron was formed by a merger between Houston Natural Gas and Intemorth. Houston’s Natural Gas’s CEO Kenneth Lay directed the merger of the two enterprises. Kenneth Lay was the CEO of Enron. Enron was formerly responsible for the distribution of electricity and gas in the United States. In the merger, Enron gained a large amount of debt, and provoke a deregulation and no more rights to its pipelines. The company had seek a way to make profits and cash flow. Kenneth Lay