Unlike Enron’s case, Arthur Andersen Ltd was more concerned with ethical and moral codes, as well as with organizational culture motivating employees to accomplish objectives. Despite this advantage, the audit department faced the conflict of interest problem that focused mostly on a rigid competition to raise profits and bring in revenues.
The emerged rivalry between accountants has led to the financial problems that are connected with shifts in priorities. Due to the fact that the concept of “tone at the top” is adopted by Arthur Andersen, it is possible to assert that the company’s partners planned to be driven by the revenue generations (Brooks and Dunn 105).
However, in case considerable risks are undertaken to increase profits, the probability of the emergence of audit problems, causing unfavorable outcomes is more evident.
With regard to the above-presented case, the AA managers followed Enron’s footsteps and made similar mistakes in terms of their financial objectives. Specifically, due to the absence of strict regulations, Enron’s accountants put all the employees under the threat by concealing information about profits.
Lack of transparent reporting of balance sheet led to the disaster. So, AA failed to acknowledge the Generally Accepted Accounting Principles that do not allow the shares recording as the rise in stakeholders equity if they are not issued for cash.
Focus on rivalry rather than on the main principles of corporate social responsibility prevented the Enron’s managers to settle the problem and develop profound internal control for carrying out business transactions. The debate on the demise of the company specifically concerns the influence of professional and business goals on public sector.
At this point, Enron tragedy as occurred as a result of failure of the accountants to take responsibility and report to the governmental authorities about the fraudulent operation occurred at the organization.
The current legislature and codes have taken the Enron case into the deepest consideration to develop a set of rules that could guarantee protection for employees, as well as enhance accountants responsibility for business activities.
According to AICPA, “Although members not in public practice cannot maintain the appearance of independence, they nevertheless have the responsibility to maintain objectivity in rendering professional services” (n. p.). Enron’s accountants failed to follow these principles and, therefore, they would have been accused of the violation if the provisions had been introduced during this period.
Responsibility to other employees is another corner stone that relates to Enron’s case. This section is also mentioned in the corporate governance regulations that control the accountant activities.
According to Clarke, “…the legislature, regulatory and market responses to Enron will make the corporate governance system better though there is a danger of overreacting to extreme events” (328). Taking advantage of the Enron’s case, the managers should learn much from the tragedy and make conclusions in terms of their responsibility in front of their most valuable asset – employees.
In conclusion, while developing a business organization, the executives should establish corporate priorities in relation to their liabilities to the personnel. Failure to reach integrity and objectivity in carrying out business can become a serious obstacle to increasing profits and gaining a competitive advantage over other companies.
External and internal aspects should be considered equally to be able to sustain the company’s growth. Corporate governance initiative also relies on respect and responsibilities imposed on employees and managers.
Works Cited
AICPA. ET Section 55 – Article IV – Objectivity and Independence. n. d. Web.
Brooks, Leonard, and Paul Dunn. Business and Professional Ethics: For Directors, Executives and Accountants. Connecticut: Cengage Learning, 2009. Print.
Clarke, Thomas. International Corporate Governance: A Corporate Perspective. New York: Routledge, 2007. Print.