Last Updated 10 Jan 2022

Enron Scandal with Code of Ethics

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Arthur Andersen Limited Liability Partnership was one of the “Big Five” accounting firm who providing auditing, tax and consulting services to large corporations. This is an accounting firm that held by reputation and trust by public and investor but it facing bankruptcy in the end. Early of the 20th century, invertors don’t know who can be trust because there was spread of business scandals. All they need was auditors. Andersen establishes a company to be trusted. He and his auditors will check and certificate the company accounts if the accounts were honestly and accurately.

Andersen advises his partners to pay attention on public needs rather than the profit of company make. After 1950s, the company force to commercialize for the coming of Information Technology era but it still keeps its reputation. But to win the best customers, they must attract a new generation of employees. The new director was keen to explore more customers. They audit and certificate more accounts and made larger profits for their company. Andersen guaranteed the accounts for dishonest company from John DeLorean to Enron and WorldCom.

The code of ethics which Andersen against are: 1. Standard I (A) Knowledge of the Law. Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation.

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Members and Candidates must not knowingly participate or assist in and must dissociate from any violation of such laws, rules, or regulations. A case of John DeLorean, the founder of the DeLorean Motor Company who goes Ireland to builds his dream car. British government desperate to create job and gave 80 million pound. It was Andersen responsible for the money he spends. But DeLorean spend the money not belong to him. He will spend the company fund s of purchase of equipment for decorating his houses. He orders two Mercedes Benz, one send to his wife use in California.

DeLorean asks to pay 17 million dollar to his Swiss bank account call GDP. In conclusion, DeLorean do nothing with the dream car. Although the Code and standard do not required that members and candidates report violations to their governmental or regulatory organizations but strongly encourages members to report violations. Andersen should report DeLorean who spend the money which are not related to the development of dream car and the money was not belonging to him. They shouldn’t participate in illegal activities such help DeLorean to cover the fact and follow the rules and regulations. . Standard I (B) Independence and Objectivity. Members and Candidates must use reasonable care and judgment to achieve and maintain independence and objectivity in their professional activities. Members and Candidates must not offer, solicit, or accept any gift, benefit, compensation, or consideration that reasonably could be expected to compromise their own or another’s independence and objectivity. In case of WorldCom, who was one of the company who use false account to earning profit by deceive public. After the scandal, WorldCom was the largest bankruptcy in U. S. history.

It led to a domino effect of accounting and like corporate scandals that continue to tarnish American business practices and the foundation of economic. Thousand hundred of investors lost their life saving. Arthur Andersen emphasizes professional view and implements independence and objectivity which were refusing to certificate dishonest accounts. New generation of employees who work in Andersen should follow the thinking and view of the establisher. Although they want to expand their business, but they should work independence to report or refuse to certificate dishonest accounts, not helping them to deceive public. . Standard I (D) Members and Candidates must not engage in any professional conduct involving dishonesty, fraud, or deceit or commit any act that reflects adversely on their professional reputation, integrity, or competence. Arthur Andersen has involved in dishonesty act which was making false accounting. The company has loss its reputation once the scandal burst out. In a nutshell, all company should follow rules and regulation. Otherwise, it may harm thousands even millions of people lost their life saving or in debt.

Enron Scandal with Code of Ethics essay

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What exactly happened with the Enron scandal?

The Enron Scandal, is a securities fraud scandal which eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas. It also led to the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world.

How was Enron unethical?

The Unethical Behavior of Enron. Enron, once the countries seventh-largest company according to the Fortune 500, is a good example of how greed and the desire for success can transform into unethical behavior. Good ethics in business would be to compete fairly and honestly, to communicate truthfully and to not cause harm to others.

What caused Enron to fail?

The particular causes of Enron's failure are complex. There are lots of issues that have to do with the Enron collapse. Enron is a company that was called as Houston Natural Gas and then Enteron. It becomes politically connected player in the new deregulated market of energy.

What could have been done to avoid the Enron scandal?

Enron scandal could have been avoided if employees and management had a stronger ethical culture and if arrogance and greed weren't dominant among management. All organizations should take heed and put measures in place in avoid a situation like Enron.

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