Enron's Collapse and Ethical Framework Essay Example | Topics and Well Written Essays - 2250 words

Enrons Collapse and Ethical Framework - Essay drillThis was an eerie accounting policy that Enron came up with. Although the present earning construe very appealing, but the profits make today could non be shown in the future statements which made the future proforma financial statement looked a little weak. Enron adopted an opposite extremely innovative accounting policy of starting to make more future contracts in order to make financial statements of future years also look better. This created a never ending spiral and at the end of that spiral was destruction for the play along. there were certain other accounting malpractices at Enron. They kept a debt of $600 million off book dear to make received that the financial statements of the company looked good. The reason why this practice is not encouraged is because it does not reflect the full-strength accounting position of Enron. Debt would have decrease the net value of the company, and share terms would have stimul ate down. However, this accomplish prevented this from happening and share prices of Enrons stock remained constant. This is misleading because owners and investors were evaluating a company at a much higher price than the true value of the company. This is an example of an open impact of truth and trust. Investors commonly select the board of directors to make the long term policy for them. Directors hire managers to function the business for them. This shows disjoint of ownership and control. This means that owners are not directly controlling the business, but they confide it to their people selected.... There were certain other accounting malpractices at Enron. They kept a debt of $600 million off book just to make sure that the financial statements of the company looked good. The reason why this practice is not encouraged is because it does not reflect the true accounting position of Enron. Debt would have decrease the net value of the company, and share price would have come down. However, this action prevented this from happening and share prices of Enrons stock remained constant. This is misleading because owners and investors were evaluating a company at a much higher price than the true value of the company. This is an example of an open violation of truth and trust. Investors usually select the board of directors to make the long term policy for them. Directors hire managers to run the business for them. This shows divorce of ownership and control. This means that owners are not directly controlling the business, but they entrust it to their people selected in the Annual General Meeting. These people than entrust the responsibility of day to day operations to managers. In this way, there is a series of trust contract being formed. Ethics of any action require that trust should not be betrayed and whatever happens truth should be told to the real owners who have certain(p) the directors with their responsibility. The first breach of trust in En ron case started when the directors started sending misleading reports to the owners to make the financial statements of Enron look healthy. This is open violation of truth and trust and shows that in the case of Enron there was a clear reason of breach of trust. Another problem in this case is the abuse of powers from directors. They started a new system of accounting and started fooling the real