This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: / 5 Professor Schneider
ACCT 2101 \j ﬁrm/9 h. 0 ﬂow um“ o7 Cal/WW.
Dec. 5 2007
Ethics in ﬁnancial reporting (Enron)
At the year of 2002, one of the biggest energy company Enron had been collapsed. Their
gross sales at 2000 were 101 billion dollars, assets were 47.3 billion, and number of labors
was 19,000. They supplied natural gas to mid-west of U.S., Florida, Argentina, Bolivia, Brazil, :
Columbia, Puerto Rico, and Venezuela. Also they had power plants in India, Mid—south
America, Latin America, China, Turkey, and in Italy. Their business ﬁeld was global.
So, why did they were collapsed? What made them to fall? We can see the importance of company ethics and ethics of executives. II. Problem
What they did was so vary. However, the main theme in this case is accounting ethics.
According to my researches, they fabricated stocks and accounting paper. Enron did wrong on accounting to deceive stock holders, and did false operation. When stockholders hear that a company could make a contract with other energy company or
nation so they can get new energy source, it is so obvious that stock prices go up. Enron made
many contracts to make their stock prices higher. However, some contracts made signiﬁcant
loss. Enron falsify accounting and they could even deceive auditors. Unforttmately, falsifying
paper was not the only thing they Enron established around 900 branch companies to
keep Enron stable. What they did was this. If Enron had loss, Enron put their loss down to branch company’s accounting. Enron promised stock holders that if their branch company has loss on their balance sheet, they will issue Enron’s stocks. They offered Enron’s stock, which was high price at that time, to gather more investors. III. Ethics I am not sure about where was the starting point of false accounting. After they started to not
to record loss properly, Enron was adorned as proﬁtable company. Obviously, their stock kept
high price. However, over stated gross sales, cumulative loss, high dividend they promised,
and the false they made on accounting ﬁnally made Enron to fall. Enron was like a fake
diamond. They could dazzle people by showing bright splendor of fake diamond, but they never could be real diamond. The most shocking fact was that most of executives already knew about this include CEO
Jeffrey Skilling. The money they earned was not the real money. They just put on accounting
says that we earned money. The information, that executives and stock holders taking, is
different. Executives have more information. iftheir information is connected with immoral, the problem like Enron rises. We can see one important factor in this case. The credit is so important to company; also ethic
is necessary to deposit credit. Ifa company lose their credit even one time, it is really hard to
back up. Enron was collapsed after two month the scandal was exploded. Their stock which
was eighty dollars value became value of forty cents. What a risk! With ethics, company can
run their money and accounting properly, and they have to. Ethic is not a choice or dilemma. It is that all business people must keep with their conscience. It is revealed that Enron’s play was related with President Bush too. Enron used so much money to politic and media ﬁelds. People invested money to company, but money came back as betrayal of company and politicians. What if they used that money to give dividend or ﬁll their loss? IV. Conclusion The CEO has been punished. Now I am thinking how I am going to operate company when
I became an executive member. Unethical process of operation always brings great risk and
cost. While we are taught how to make proﬁt and how to manage company better, we also
need to learn ethic. Every job in this case was done by human. Personality should be fortiﬁed,
so we should prevent unethical action in any ways. In accounting, there is no possible way to
conceal their false forever. Ethical management doesn’t guarantee success. However, we
should say companies have to have the responsibility when they do every transaction because
it is a credit among people. Even if imnmral makes proﬁt, we should have bravery to stop it to prevent one more huge tragedy in business ﬁeld. ...
View Full Document
This note was uploaded on 07/13/2008 for the course ACCT 2101 taught by Professor Turner during the Spring '08 term at Georgia Institute of Technology.
- Spring '08