How Ethics Influence Behavior in Organizations

Topics: Enron, Enron scandal, Arthur Andersen Pages: 3 (1025 words) Published: February 21, 2013
In reality, there are some specific regulations governing our lives. However, regulations do not restrain everything. In some aspects, ethics play a much more important role than regulations. Ethics is “the code of moral values or principles that governs the behaviors of a person or group with respect to what is right or wrong” (Daft & Armstrong, 2012, p.369). Unethical behavior is very common in organizations. When people need to make a decision, unethical behavior may appear, especially when decision choices conflict with one’s self-interests. The Enron Scandal is a very interesting topic to better understand what are some responses organizations may have to unethical behavior.  Previous to its collapse, Enron was an energy giant based in Texas with Arthur Andersen as their auditor. Enron violated accounting standards by manipulating the mark-to-market accounting method so their earnings would appear inflated, thus making it seem that they are financially stable and successful (Cunningham & Harris, p.40). When Arthur Andersen audits Enron, they are supposed to give an objective evaluation, however, the audit team ignored many pressing concerns that people at Andersen’s head office were giving advice on. The team ignored the inflated earnings Enron reported albeit having a model for detecting falsified financial statements (Cunningham & Harris, p. 44). That particular audit team at the Houston office handled this problem by responding in an unethical manner. There have been speculations that Arthur Andersen received large amounts of money from Enron for their services, with some suggesting that Arthur Andersen willingly falsified financial statements for Enron (Nelson et al., 2008). Often, these types of unethical decision-making pose a great hindrance to the public, especially with a company as well established as Enron was. The scandal began to form in 2001 when, the CEO at the time, Kenneth Lay was...
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