BIGGER THAN ENRON 5
Running head: BIGGER THAN ENRON
Bigger Than Enron
Student’s Name
Affiliation of Institution
Date of Submission
Bigger than Enron
Question 1
The former chairman Levitt talks about the culture of gamesmanship in the video to refer to the happenings that are surrounding the business enterprises. By quoting that it is the culture, it means that it is a common game that has been in existence in the American business fields that companies break the business laws all for their gains (Imdb, 2002). It is the bending of the rules that govern the business operations that saw the Enron come to collapse since the company embarked on illegal practices that saw it rendered bankrupt.
In business ethics, any company that is running a business should adhere to the rules that regulate the business operations so that there is a common ground within which the businesses operate (Ferrell, & Fraedrich, 2015). Exaggerated profits figures saw the company becoming bankrupt since it could not meet its financial obligations.
Question 2
Arthur Anderson is responsible for the downfall of the Enron Company since the accounting company did not exercise the duty of care in its profession as it incorporated accounting fraud while performing the accounting duties. The company was responsible for carrying out the auditing of the Enron Company and after they had done the auditing, the report that the Anderson Company gave was misleading to the investors. The report that was provided by the auditing company showed that Enron had a strong financial base that attracted investors and financial institutions were ready to offer debts. On the contrary, the Enron was less capable of paying the debts, and it was declared bankrupt discouraging investors (DesJardins, 2009).
Question 3
If an auditing company has not exercised the duty of care in its operations, then the Financial Accounting Standard Board will investigate into the matter, and if the claim is true, then the auditing company license to operate will be terminated. Since James Hooten knew that there were some practices that the company had engaged in and they were not in line with the operating regulations, he was unwilling to let the board have a look at the documents that held evidence to the case. He knew that the operating license for the Andersen’s Company was at risk of being canceled. According to business ethics, it is unethical to go against the rules that govern the operations of a business and a failure to comply leads to heavy penalties.
Question 4
Al Dunlap earned his title the chainsaw Al due to his fondness of job slashing. He used methods that were fraud to leverage the declining sales within a company and referred to these methods as turnaround strategies which finally earned him the title.
Question 5
In his operations, Al Dunlap had many accounting frauds that made him be known of making a company realize profits which were virtual. Dunlap could include in the financial statements some exaggerated inventories and sales that never existed. These figures made the company look like it was achieving excellence, but on a real sense, the company was experiencing losses. In Sunbeam, Dunlap made the company seem to have made a profit of $189 million which was a record sale. The figure rose some suspicion among the players in the industry who decided to look into the matter. These fraudulent reports acted to mislead investors who could have made the wrong investment decisions (De George, 2011). The company later decided to fire him following a discovery of his fraudulent reports he was providing.
Question 6
Charles did not want to disclose the documents that were used in the process of auditing that was carried out in the Enron Company in an attempt to conceal the truth and expose the truth that the financial reports provided was fraud. In disclosing the documents, it meant that investors could know the truth and they will not accept to invest in Enron Company and therefore decided to shred the documents.
Question 7
The partners decided to have the Enron as their client since they knew that there are Generally Accepted Accounting Principles in place. There is a regular checkup to make sure that accounting companies follow the rules while giving allowances for the companies to explain why they did not comply. Andersen Company thought it could use the GAAP as the defense for their deviations in the accounting procedures.
References
Imdb, (2002). Bigger Than Enron. Retrieved from https://www.imdb.com/title/tt0879016/
De George, R. T. (2011). Business ethics. Pearson Education India.
DesJardins, J. R. (2009). An introduction to business ethics. New York: McGraw-Hill Higher Education.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson Education.