Limitatitons of the Accounting Code of Ethics
Professional values, ethics, and attitudes. (AC 423) Group Assignment
QUESTION: With the advantage of hindsight, what advice would you have given the Enron Board to avoid the 2001 disaster?
GROUP MEMBERS
1. Augustine Kupara R082559R 2. Tonderai Nyamadzawo R082987G 3. Simbarashe Chaka R089613J 4 Brighton Nzvuvu R089824H 5. Walter Danger R082990X 6. Simon Chigwanda R075968L 7. Ashley Murisa R082991Y 8. Frank Garatsa R082988H 9. Presely Nheweyembwa R076037L 10. Peter Donald R055241G 11. Shingirayi Gwete R089773H
BACKGROUND
Enron Corporation was formed in 1985 from a merger of Houston Natural Gas and Internorth, Enron Corp. By early 2001, Enron had grown into the 7th largest U.S. Company, and the largest U.S. buyer/seller of natural gas and electricity. It was heavily involved in energy brokering, electronic energy trading, global commodity and options trading, etc. in 2001 Enron started to show major signs of trouble by announcing a huge third-quarter loss of $618 million. On October 22, 2001, the Securities and Exchange Commission (SEC) began an inquiry into Enron’s accounting practices and later that year the company filed for
Bankruptcy.
Key investigations revealed many shortcomings which include the use of complex & dubious accounting schemes to reduce Enron’s tax payments; to inflate Enron’s income and profits; to inflate Enron’s stock price and credit rating; to hide losses in off-balance-sheet subsidiaries; to engineer off-balance-sheet schemes to funnel money to themselves, friends, and family; to fraudulently misrepresent Enron’s financial
Enron also used complex dubious energy trading schemes for instance the “Death Star” Energy Trading Strategy which was aimed at taking advantage of a loophole in the market rules governing energy trading in California.
This essay will attempt to advice the Enron Board to avoid the 2001 disaster with the advantage of hindsight by focusing on the major areas in the
QUESTION: With the advantage of hindsight, what advice would you have given the Enron Board to avoid the 2001 disaster?
GROUP MEMBERS
1. Augustine Kupara R082559R 2. Tonderai Nyamadzawo R082987G 3. Simbarashe Chaka R089613J 4 Brighton Nzvuvu R089824H 5. Walter Danger R082990X 6. Simon Chigwanda R075968L 7. Ashley Murisa R082991Y 8. Frank Garatsa R082988H 9. Presely Nheweyembwa R076037L 10. Peter Donald R055241G 11. Shingirayi Gwete R089773H
BACKGROUND
Enron Corporation was formed in 1985 from a merger of Houston Natural Gas and Internorth, Enron Corp. By early 2001, Enron had grown into the 7th largest U.S. Company, and the largest U.S. buyer/seller of natural gas and electricity. It was heavily involved in energy brokering, electronic energy trading, global commodity and options trading, etc. in 2001 Enron started to show major signs of trouble by announcing a huge third-quarter loss of $618 million. On October 22, 2001, the Securities and Exchange Commission (SEC) began an inquiry into Enron’s accounting practices and later that year the company filed for
Bankruptcy.
Key investigations revealed many shortcomings which include the use of complex & dubious accounting schemes to reduce Enron’s tax payments; to inflate Enron’s income and profits; to inflate Enron’s stock price and credit rating; to hide losses in off-balance-sheet subsidiaries; to engineer off-balance-sheet schemes to funnel money to themselves, friends, and family; to fraudulently misrepresent Enron’s financial
Enron also used complex dubious energy trading schemes for instance the “Death Star” Energy Trading Strategy which was aimed at taking advantage of a loophole in the market rules governing energy trading in California.
This essay will attempt to advice the Enron Board to avoid the 2001 disaster with the advantage of hindsight by focusing on the major areas in the
References: * Bob Lyke.CRS Report RS21120, Auditing and its Regulators: Proposals for Reform After Enron. * JOINT COMMITTEE ON TAXATION, 2003 Report of investigation of Enron corporation and related entities regarding federal tax and compensation issues, and policy recommendations * McLean, Bethany. 2001. “Is Enron Overpriced?” Fortune. * Paul D. Miller, Brief History of Enron (accessed 27 November 2012) http://www.freegrab.net/enronhist.htm * Paul M. Healy and Krishna G. Palepu, (2003) The Fall of Enron * Powers, William C., Raymond S. Troubh and Herbert S. Winokur. 2002. “Report of Investigation by the Special Investigative Committee of the Board of Directors of Enron Corp.” * Steven C. Currall Marc J. Epstein 2003. Lessons From the Rise and Fall of Enron * Watkins, S., 2002. Email to Eron Chairman Kenneth Lay,