Enron Case Study Analysis

Running Head : Enron Case Study Analysis (Author 's Name (Institution 's Name

Enron Case Study Analysis

S . No Table of Contents Page No

1 Enron Case : A Background 3

2 Enron : An Introduction 6

3 Enron Case : An Organizational Analysis 8

4 Enron : An Ethical Outline 25

5 Business Ethics : A Literature Review 30

6 Enron Scandal : An Ethical Analysis 32

7 Conclusions 38

8 References 41 Enron Case : A Background

Enron was ranked in the USA 's Fortune top 10 list of companies , based on its

earnings in 2000 . Its published accounts for the year ended 31 December 2000 showed a profit of 979 million and there was nothing evident to alert shareholders to the imminent disaster that was going to disclose over the next year or so and make Enron the largest insolvency in US history

Enron 's difficulties related to its activities in the energy market and the setting up of a series of `special purpose entities (SPEs . Enron used the SPEs to conceal large losses from the market by giving the appearance those third parties covered crucial exposures . Nevertheless the SPEs were really nothing more than an extension of Enron itself and so Enron 's risks were not covered . Some of the SPEs were used to transfer funds to some of Enron 's directors . In October 2001 , Enron declared a non-recurring loss of 1 billion and also had to disclose a 1 .2 billion write-off against shareholders ' funds . Later , Enron made known another accounting problem which reduced its value by over half a million dollars . It looked as though a takeover might be on the cards from Dynegy , however in November announcements by Enron of further debts led to the takeover bid falling through and in December 2001 Enron d for bankruptcy

In retrospect , it seems that the directors were not interrogated closely enough about the use of the SPEs and their accounting treatment . What has become clear is that there was some concern in Enron 's auditors - Andersen , about the SPEs , and Enron 's activities . Andersen failed to ask the directors hard enough and Andersen 's own fate was sealed when some of its employees shabby formalities relating to Enron , hence eliminating crucial evidence and contributing to the failure of Andersen which has itself been taken over by different rivals

The Enron case focuses upon the principal need for integrity in business : for the directors to act with integrity and honesty , and for the external audit firm to be able to ask probing questions of the directors without holding back for fear of possibly offending a beneficial client . This latter situation is aggravated when auditors receive large fees for non-audit services , which may well exceed the audit fee itself , as a result endangering the independence of the auditors . Enron also highlights the need for independent non-executive directors who are qualified enough to be able to ask searching questions in board and committee meetings to try to make certain that the business is operated properly according...