Enron: Rise and Fall
Income Manipulation: Enron’s rise and fall
General Introduction
“Rather fail with honor than succeed by fraud1.” The importance of values and ethics has always shaped the very fabric of human society. This was evident from the era in which the author of this quote, the famous Greek poet Sophocles, lived until modern times. In my opinion, the famous sayings “honesty is the best policy” and “the truth shall set you free” are invaluable and should be followed by everyone. This pertains to all facets of life and the code of ethics should be practiced and applied by all in the world of politics, sports, science, and business. In the complex world of finance and accounting, the importance of ethical behavior and professionalism cannot be stressed enough. The Enron Corporation evidently did not read the code of ethics or morals. Although Enron had the makings of a successful corporation, Enron’s unethical behavior ultimately led to its downfall. As we have learned in financial accounting, the income statement shows a “company’s operating performance and summarizes the profit-generating activities during a particular reporting period.2” Along with a company’s balance sheet and other financial disclosures, the income statement provides pertinent information to both the internal and external users of a particular company. As this is the case, financial managers must walk a tight rope in providing this information to its investors and creditors while maintaining profitability and stability towards the companies they work for. Most financial managers and institutions exude professionalism and are successful in walking the aforementioned tight rope. Unfortunately, there are certain people in this world that decided to commit immoral and unethical actions in their business practices. The following sections will focus on the various forms and methodologies of income manipulation with analysis on the case of Enron Corporation committing
General Introduction
“Rather fail with honor than succeed by fraud1.” The importance of values and ethics has always shaped the very fabric of human society. This was evident from the era in which the author of this quote, the famous Greek poet Sophocles, lived until modern times. In my opinion, the famous sayings “honesty is the best policy” and “the truth shall set you free” are invaluable and should be followed by everyone. This pertains to all facets of life and the code of ethics should be practiced and applied by all in the world of politics, sports, science, and business. In the complex world of finance and accounting, the importance of ethical behavior and professionalism cannot be stressed enough. The Enron Corporation evidently did not read the code of ethics or morals. Although Enron had the makings of a successful corporation, Enron’s unethical behavior ultimately led to its downfall. As we have learned in financial accounting, the income statement shows a “company’s operating performance and summarizes the profit-generating activities during a particular reporting period.2” Along with a company’s balance sheet and other financial disclosures, the income statement provides pertinent information to both the internal and external users of a particular company. As this is the case, financial managers must walk a tight rope in providing this information to its investors and creditors while maintaining profitability and stability towards the companies they work for. Most financial managers and institutions exude professionalism and are successful in walking the aforementioned tight rope. Unfortunately, there are certain people in this world that decided to commit immoral and unethical actions in their business practices. The following sections will focus on the various forms and methodologies of income manipulation with analysis on the case of Enron Corporation committing