Corporate Management - Research Paper Example

One such unfortunate event in the history of accounting data misuse is the ethical fraud of Enron Corporation and Arthur Anderson- the Auditor of Enron Corporation.

Established in 1985 as an energy company in Houston, Texas, Enron Corporation, in a move to diversify its business, created SPEs (Special Purpose Entities). In this spree, the much-needed amount for the creation of such vehicles was received from the internal employees of the company itself.

Adding to the woes, Enron started selling energy commodities by acting as a broker and profited from the difference between the prices of sellers and buyers, as it had entered into separate contracts with them (AACSB, 2002).

Ethically, Enron acted against customs and made use of Ghost companies and mark-to-market trading schemes to gain the undue advantage of laws and connections with the Auditors. As Joseph Kay has remarked: “Enron was fond of another procedure known as mark-to-market, which allowed it to increase the value of present assets held by the company by estimating future market prices. Since Enron dominated the energy trading business, the prices by which it marked-to-market were largely subjective- that is, determined by Enron itself by the earnings it wanted to report”.

Defying the laws further, Arthur Anderson, to show loyalty to the company, provided consultancy to the Corporation and presented misleading and faulty audit data of the Corporation to the stakeholders and investors (Rittenberg et al, 2009, p. 427). The results were graver than imagined. It left Enron bankrupt, due to losses running into billions (debt- $3 billion and losses- $638 million). Apart from financial losses, it also suffered blemishes on its reputation and the delisting of its shares and stock. Employees also suffered the loss of their jobs.

Data is valuable only if it is in the right hands and used in the right sense. Information contained in data is sensitive and can ruin the fate of the organization handling the data. Thus, data analysis suffers from reliability, validity, authentication, and verification.

However, if data is placed and used correctly, it can lead to success in planning, risk assessment, and plans related to expansion, diversification, and many more.

Enron Corporation acted against the transparency and responsibility of being an ethical organization for its investors and invited lethal damage to its business by tying hands with the Auditors (Prenhall, n.d). This scandal led to the enactment of the Sarbanes-Oxley Act which aims to detect fraud in the accounting framework at both the operational and managerial levels (Niskanen, 2005, p. 18).