Accounting Scandal

Scandals and Ethics

What are accounting scandals? These are defined as political and business scandals that are usually the results of disclosure of misdeeds by trusted executives of large public corporations. These typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of corporate assets or underreporting the existence of liabilities, sometimes with the cooperation of officials in other corporations or affiliates. One of the most famous accounting scandals of our time is Enron. Enron corporation was an American energy, commodities, and services company based in Texas. Before filling for bankruptcy in 2001, Enron was one of the world's major electricity, natural gas, communications, and pulp and paper companies. Towards the end of 2001, it was revealed that its reported financial condition was sustained substantially by an institutionalized, systematic, and creatively planned fraudulent accounting practices.

There were many causes of the Enron collapse. Among them are the conflict of interest between the two roles played by Arthur Andersen, as auditor but also as consultant to Enron; the lack of attention shown by members of the Enron board of directors to the off-books financial entities with which Enron did business; and the lack of truthfulness by management about the health of the company and its business operations. In some ways, the culture of Enron was the primary cause of the collapse. The senior executives believed Enron had to be the best at everything it did and that they had to protect their reputations and their compensation as the most successful executives in the U.S. When some of their business and trading ventures began to perform poorly, they tried to cover up their own failures. (www.scu.edu)

Enron and it`s over ambition and greed is a sad story of the greatest bankruptcy in the history of America, where in a lot of unusual and unethical accounting tactics...