Enron Case

Enron 1

Enron Case

May 16, 2010

Dr B. Campbell

Background of Enron

Enron Corporation was an Energy company based in Houston, Texas. Founded in 1985 by Kenneth Lay Enron employed about 22,000 people and was one of the world’s leading natural gas, electricity and communications companies. In the year of 2001 it was revealed that Enron was reported financial accounting errors in the company fiscal year earnings. This padded accounting financial records created Sarbanes –Oxley act of 2002, which is having enhanced standards for all US public company boards, management and public accounting firms. This particular act covers corporate broad responsibilities to criminal penalties and the requirements of the Securities and Exchange Commission. Under this act if reported earnings are restated by the company due to securities fraud the officers must forfeit their income and bonuses. If one does not there are serious penalties involved such as up to 25 years in prison time and also up to $5 million dollars in if the reporting record looks to be altered or CEO knowing this information is inaccurate. In 2006 Kenneth Lay was found guilty of wire fraud, bank fraud, securities fraud and conspiracy for his part in falsifying Enron’s financial reports (Kubasek, N. K., Brennan, B. A., & Browne, N. 2009).

1) Did the Enron executives act ethically by using off shore, off balance sheets partnerships to hide Enron’s liabilities? No, according to the reading of the case Enron created the off shore accounts to avoid taxes and to raise the profits of the business. This gave the company time to exchange currency from one account to another while adjusting the account book to make the company look more profitable. Furthermore, misleading the public thinking that Enron is doing well in the financial capital and leadership to generate revenues and profits on these off shore accounts. This is not an ethical accounting or business practice because at this point this...