Question

Investigations into the corporate scandals of the recent past revealed that the accountant did not question the ethical validity of the accounting transactions and practices that led to the accounting frauds and resulted in an enormous loss to the public and damaged the image of the accounting profession. Do you agree?. Give a detailed account of how accountants facilitated some of the famous corporate scandals like Enron.

Answer 1

The Enron scandal turned in to the indictment and criminal conviction of Big Five auditorArthur Andersen on June 15, 2002. Although the conviction was overturned on May 31, 2005, by the Supreme Court of the United States, the firm ceased performing audits and split into multiple entities.The Enron scandal was defined as being one of the biggest audit failures of all time. The scandal included utilizing loopholes that were found within the GAAP (General Accepted Accounting Principles). For auditing a large-sized company such as Enron, the auditors were criticized for having brief meetings a few times a year that covered large amounts of material.

Ethics is concerned with the kinds of values and morals an individual or a society finds desirable or appropriate. Ethical theory provides us with a system of rules or principles that guide us in making decisions about what is good or bad and right or wrong in a particular situation. In essence, ethical theory provides a basis for understanding what it means to be a morally decent human being. As is pertains to leadership, ethical theory is concerned with what leaders do and who leaders are. The choices leaders make and how they respond in a given circumstance are informed and directed by their ethics. In other words, a leader’s choices are influenced by their moral development.

For those not familiar with the Enron scandal, most of the top executives were tried for fraud after it was revealed in November 2001 that the company’s earned had been overstated by several hundred million dollars. At the time, Enron was ranked the sixth-largest energy company in the world. Top Enron executives sold their company stock prior to the company’s downfall, whereas lower-level employees were prevented from selling their stock due to 401K restrictions. Enron filed for Chapter 11 protection in December 2001 and instantly became the largest bankruptcy in U.S. history at that time. This left thousands of workers with worthless stock in their pension. The lower-level employees lost their life savings due to the collapse. The U.S. Department of Justice subsequently opened a criminal investigation into Enron’s collapse in January 2002.

In assessing consequences, there are three different approaches to making decisions regarding moral conduct: ethical egoism, utilitarianism, and altruism . Ethical egoism states that people should act so as to create the greatest good for themselves. A leader with this orientation would take a job or career that she or he selfishly enjoy. Many of the Enron executives made decisions to achieve their goal of maximizing profits. The executives had a very high concern for their self-interests but a very low concern for the interest of others.

REFERENCE:-

1) wikipedia.org

2) pennstate