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Enron Scandal - Research Paper Example

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Summary
This essay analyzes the Enron scandal, which had deep repercussions for the American system in many ways. It led to the creation of legislation that ensured the presence of transparency and accountability in business organizations. Enron perpetrated fraudulent activities…
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Enron Scandal
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Enron Scandal

Download file to see previous pages... This created financial discrepancies in the form of loans. Profits were artificially generated in order to mention the cash flows that came in the form of such loans. Another technique used by the organization was to speculate on the energy sector. It calculated the market prices for the energy sector. The importance of ethics has also been demonstrated in the aftermath of the scandal. Corporate organizations need to have sound policies that demonstrate commitment, responsibility, and good governance. Such a culture helps employees to work for the prosperity of the organization. The collapse of Enron triggered shockwaves that took time to heal. The legislation in that time period allowed audit firms to provide diverse services which helped in the creation of fraudulent or misleading financial reports and statements. A major problem which occurred was the fact that Enron could recruit auditors that were inclined to make favorable statements in the organizational interest.
Corporate scandals have a negative impact on economic systems because they lead to drastic changes. The Enron scandal that erupted in 2001 shook the foundations of the American financial system. It had a catastrophic impact on the confidence of the market because the organization had been involved in fraudulent and malicious financial activities. The organization would become insolvent while its auditing partner, Arthur Anderson was also on the verge of bankruptcy. Enron was an organization that had been created in the mid-1980s. Jeffrey Skilling, Kenneth Lay, and Andrew Fastow were responsible for the scandal which involved the lack of proper financial reports and statements (Brewer & Hansen, 2002). Stock values were overstated in order to attract more cash flows. The Enron scandal had widespread repercussions on the entire financial system. The main executives received sentences while certain firms like Citigroup and Anderson Auditing had to pay heavy. ...Download file to see next pagesRead More
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