Enron Company
The scandal that took over the business environment and involved the executives of Enron company is well-thought-out to represent one of the most notorious commercial delinquencies in the history of the United States (Yallapragada, Roe, & Toma, 2012). Moreover, numerous researchers in the area consider the case of Enron an unofficial example of a basic white collar crime. The latter is defined as a criminal activity aimed to obtain financial profit in a non-violent way while operating within a workplace setting that offers education and is perceived as respected. The whole Enron process was based on the statement of deregulation that allowed the executives of the company to interfere with the earnings reports that were presented to the investors and workers.
On a bigger scale, Enron executives were able to skew the reports and conceal the data regarding the company’s losses. Therefore, the investors had to make more monetary contributions to the company’s budget so as to maintain the existing level of profits (which was fake, obviously). The factual financial state of Enron was only available to the executives that were involved in the fraud as the latter basically stole the money coming from investors by misrepresenting the earnings in the reports. It also led to a situation where even more stockholders wanted to contribute to the financial condition of Enron. When the fraud was found out, the company went bankrupt and disappeared from the worldwide business scene.
AIS and Security
The accounting practices that were employed by Enron were also accessed by the Board of Directors of the company as it was discovered by one of the subcommittees (Silveira, 2013). The security of Enron was breached by Whitewing transactions that were “approved” by the Board and went unnoticed by other departments. It is also interesting to realize that the Board of Directors received timely updates on the status of performed operations (Riivari, Lamsa, Kujala, & Heiskanen, 2012).
Even though not all of the numerous wrongful accounting practices were exposed to the Board of Directors, these events relied on the approval coming from the Board of Directors as the latter were directly involved in the decision-making process. In other words, the Board and the Finance Committee were told about the derivatives of Enron’s business, but both parties were too inexperienced in the field to understand the full details of the operations performed by Enron executives (Pardue, Robinson, & Arrigo, 2013). The experts that analyzed this case claimed that the Board would have disallowed the use of offshoots if they learned about them beforehand.
Ethical Issue
Throughout the process of Enron collapse, the company was dealing with all kinds of activities (including energy production, its derivatives, and other energy-associated possessions). The core ethical issue, in this case, consisted in the fact that all the fraudulent activities were susceptible to being eventually discovered by the Trading Commission and the Federal Energy Regulatory Commission (Albeksh, 2016).
The main objective of the former was to ensure that the application of the company’s practices validated Enron’s competitiveness, while the latter regulated the presence of the company in the energy market. Evidently, the Exchange Commission and the Securities were in charge of controlling the activity of Enron, but they failed to do it in an efficient manner. This led to a situation where the executives chose to harm the investors’ interests so as to obtain maximum profits. The economic state of Enron depended on the auditor of the company, and he ultimately decided to betray the stakeholders so as to obtain as much fraudulent money as possible.
References
Albeksh, H. A. (2016). The crisis of the ethics of audit profession: Collapse of Enron company and the lessons learned. OALib, 3(11), 1-18. doi:10.4236/oalib.1103205.
Pardue, A. D., Robinson, M. B., & Arrigo, B. A. (2013). Psychopathy and corporate crime: A preliminary examination, part 1. Journal of Forensic Psychology Practice, 13(2), 116-144. doi:10.1080/15228932.2013.765745.
Riivari, E., Lamsa, A., Kujala, J., & Heiskanen, E. (2012). The ethical culture of organisations and organisational innovativeness. European Journal of Innovation Management, 15(3), 310-331. doi:10.1108/14601061211243657.
Silveira, A. (2013). The Enron scandal a decade later: Lessons learned? SSRN Electronic Journal, 1-32. doi:10.2139/ssrn.2310114.
Yallapragada, R. R., Roe, C. W., & Toma, A. G. (2012). Accounting fraud, and white-collar crimes in the United States. Journal of Business Case Studies, 8(2), 187-192. doi:10.19030/jbcs.v8i2.6806.