Enron Case Study Summary

Enron Case Study The expression of Enron is a fascinating one. United States is a country where auditing and be principles argon so strong. How can something take place on such high level in the United States? The Enron suit demonstrates the destiny to reclaim the accounting and somatic governance pr routineices in the United States. Moreover, the Enron case made presidential term officials to pay close tending to deregulated might market. Some of the fonts that struck me are discussed below. unmatchable of the aspects that struck me was the vision of the top attention.Enron was in the business of cipher, except Kenneth Lay make management team of MBAs, non individuals specialise in gas and energy field. My escort is that top management has to have a clear vision. It seemed that Kenneth Lay vision of the fraternity was distorted. Enron transformed from an energy compevery into an investment company. Hence, the management team was comprised of traders and invest ment bankers who had in truth small-scale knowledge of the energy business. As the business model of Enron changed so did the corporate socialisation. The culture was Get it do. Get it done now. Reap the recognises. The new business was the buying and selling of commodities. The employees were rewarded for business deals regardless of broad-term consequences. I feel this kind of reward system is not beneficial to companies it is truly short-term view of business. Moreover, analysts were derided when they asked questions or so the earnings-report. These actions points that the corporate culture was of Enron was disruptive. This raises the questions on the role of boards of directors. It seems handle the boards of directors of Enron had very little knowledge about the activities of Fastow and Lay.Its interesting that the boards of directors had so little knowledge of thing happening in the company. The takea government agency from this is that boards of directors should pay c lose attention to the management behavior and property generating strategies. The boards of directors need to take active participation in company not only when things are bad, but also when things are good. some opposite aspect was the business practices of the Arthur Andersen starchy. Its solemn to see one of the most prestige firms to engage in such a big fraud. The firm played a role of not only as an auditor, but also as a consultant for Enron.The conflict of interest was sure enough to take place. The firm saw the fortune to make money by conceal Enrons financial information. Basically, the firm helped Enron to wangle books. I believe that some executives of Andersen firm were driven by greed and deficiency of ethical sense that made them act in a fraudulent activities. Moreover, it seems that Andersen had adynamic internal control in toll of auditing. The practices of this firm raised questions about the accounting and auditing system of the United States. The co ngress was strong to repond by adopting set of crystalizes.For example, the Sarbanes-Oxley vizor was passed to reform the accounting and auditing industries. The important part of the bill was the separation of roles the separation of consulting and audit business. Yet, some other aspect was the impact on the thriftiness, especially the energy industry. This was interesting because it shows how Enron impacted the economy and business environment. The financing for energy companies dried up because of Enron scandal. As a dissolvent of limited financing options, numerous companies went bankrupt. The pledge of investors was shaken. Many investors hesitated to invest in energy corporations.I believe that the Enron incident encouraged many analysts and investors to question the financial reporting and long term money reservation strategies of companies. Furtherto a greater extent, the schoolmaster corruption also struck me. The management used financial cleverness as a financi al dodging. The recording of assets and bread that were inflated or non-existent showed professional corruption. Additionally, the intricacy in dishonest accounting practices was equitable too much. Moreover, the interviews for recruitment took place in strip clubs. The whole corporate culture was somewhat corrupted.The aspect that jumped out from the case was the relentless pursuit of profits. Yes, the main aim of any business is to make profit, but social values should be kept in mind. I believe that the requital system at Enron was also to blame. muckle involved in the scandal were making huge sum of money. The challenging aspect in this case was how Fastow was able to seduce special purpose entities (SPE). Fastow was creating these SPEs to segregate financial activities from Enrons balance sheet. The SPEs provided Enron a way to move debt from the balance sheet so the credit rating could remain high.The commodities swapping mechanism required high credit rating. The S PEs allowed Enron to camouflage debt and loss as revenue. Enron deceived investor and creditors. Furthermore, Enron invested in other companies. Once the investments began to show losses, they were transferred to SPEs. This method allowed the exchange of investment to SPEs. Hence, the sale of investment was shown as gain to Enron. Another interesting detail was that analysts didnt raise red any flags. I am sure that many analysts recommended the buying of Enron stocks. This scandal made investors and analysts more cautious.Analysts and investors began to ask questions 1) how does company make money? 2) Can company sustain strategy over the long term? Basically, the laws got fixed and analysts were more observant. These are some of the aspects that were intriguing to me or struck me. The case of Enron impart continue to be a lesson in ethics and corporate responsibility. The government agencies should not relax and should make sure that industries are regulated when it comes to reporting financial information. The incident of Arthur Andersen serves as an example for other accounting firms.