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Enron Scandal

Enron Corporation was an American Energy company prior to going bankrupt. Managing to obtain the bill by Fortune magazine as “America’s Most Innovative Company” (Microsoft Corporation, (1993-2008.) This company misused and falsified records that mislead profits to be increased. “Enron had a code of ethics and a conflict of interest policy that, if followed, should have prevented the downfall of this once high flying company. However, its board of directors waived the code and policy to allow Enron managers to form the off-balance-sheet partnership that destroyed the company.” (George & Jones, 2005) Resulting in this scandal new legislation reformed accounting practices furthermore strengthening the ability of the Securities and Exchange Commission better known as (SEC) to further investigate accounting fraud. The federal government passed the Sarbanes-Oxley Act of 2002. This law will dramatically intensify the reporting and accountability obligations of public companies and furthermore require independence on the part of the company’s audit committees. Additionally the company filed for chapter 11 bankruptcy which leads to the biggest bankruptcy in the United States history. This cost over 4,000 employees their jobs.   Manipulation of the data was achieved by avoiding reporting losses and giving the appearance of rapid earnings growth. This appearance claimed that contracts due in the future were worth more than they were. (Microsoft Corporation, 1993-2008) This scandal shook all of America with trust of any company. Investors feared that other companies were engaged in fraudulent accounting practices. Enron’s scandal also compromised the character of Wall Street stock analysis.   Ethics play a very important role in accounting and financial analysis. Misrepresentation of true income can affect several people such as board of directors, employees, and stockholders. Take for instance when the Enron managers greed and manipulation exacerbated when they sold shares...