Bad Ethics Paper - / 5 Professor Schneider ACCT 2101 \j...

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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) I. Introduction 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. ...
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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.

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Bad Ethics Paper - / 5 Professor Schneider ACCT 2101 \j...

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