Ethics in accounting the consequences of the enron scandal Free Essay Example, 3750 words

Although industry analysts and some of the Enron employees raised some doubts about the suspicious accounting practices of the corporation, Skilling and his colleagues verbally attacked those persons to defend the allegations. The company could continue to attract new investors until its share prices plummeted from $US90 per share in mid-2000 to less than $1 by the end of the 2001. This drastic drop in stock prices caused investors losing an amount worth $11 billion. Although Enron’s competitor Dynegy proposed a deal to take over the organization, it did not succeed, and therefore Enron Corporation filed for bankruptcy protection under Chapter 11. The United States Federal government passed a number of laws such as Sarbanes-Oxley Act after the Enron scandal with intent to improve corporate governance policies and to prevent such huge corporate failures in future. Today US companies pay specific attention to corporate governance laws and implement improved internal check system s to detect accounting irregularities and other illegal/unethical business practices. Problem Statement Unscrupulous accounting practices by Enron CEO Jaffrey Skilling and other top managerial person including CFO Andrew Fastow to inflate the profits of the organization resulted in Enron scandal, which was identified as the biggest corporate failures at that time. We will write a custom essay sample on Ethics in accounting the consequences of the enron scandal or any topic specifically for you Only $17.96 $11.86/pageorder now Although Enron collapse was the biggest in the history and had far reaching dreadful effects, modern organizations have a range of lessons to learn from this corporate failure. This paper will analyze the history of the Enron scandal and the role unethical accounting practices played in this collapse. The paper will also put forward some valuable recommendations for modern organizations in the light of Enron scandal. History of the Issues The merger between Houston Natural Gas and Omaha-based InterNorth led to the formation Enron in 1985 and it began operations as an interstate pipeline company. Kenneth Lay, the former CEO of the Houston Natural Gas, was appointed as the CEO of Enron and he subsequently won the post of chairman in the next year. Over the next years, the company achieved terrific growth in its sales and spread its business beyond the pipeline sector. Industry analysts praised this unbelievable growth of Enron because many contemporary organizations were struggling to survive during that period and such positive expert reviews greatly assisted the company to attract more potential investments. Jeffrey Skilling, a previous consultant for Enron, impressed the company’s former CEO Lay in his capacity as an industry analyst, and consequently Skilling was hired by Lay as chairman and CEO of Enron Finance Corp.