The Pros And Cons Of The Enron Scandal

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The managers of corporate organization are expected to maximize return of investor while avoiding principal-agent conflicts of interest, complying with regulatory standards, and enhancing the reputational capital of their organization (Marcinko D J & Caplan D H, 2012). The recent resignations and arrests of top U.S. managers, however, point out an increasing level of corporate irresponsibility and managerial negligence on Wall Street and on Main Street that has eroded global and domestic trust in U.S. markets. In the Enron scandal, corporate irresponsibility has provoked unprecedented outrage and multiple lawsuits from a range of stakeholders with demands for democratizing improving managerial accountability, structures of corporate
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In the past, Lenders and Investors learned from these scandals, and in recent times, they know for a fact, the company is unethical or corrupted and they have become hesitant to invest in any company that they think. Lawmakers and regulators of the Unites States were very worried that the economy of the country would suffer once lost confidence by investors in corporate accounting because of unethical financial reporting. In response, the Sarbanes-Oxley Act passed by the Congress (M Bazerman &Messick D,1996). The main aim of the Sarbanes-Oxley Act is in place to decrease unethical conduct in accounting scandals and corporations. As a result of Sarbanes-Oxley Act, upper management should now certify the truth of financial information. In addition, penalties for activity of fraudulent financial are much more critical (M Bazerman &Messick D,1996). In place with some standard rules and regulation, mostly corporations are less possible to commit any activity of fraudulent because from lawmakers more scrutiny. Also, to survive corporations have a better opportunity as a company with their investor when they are truthful with their lenders and investors upfront, than if they were to attempt to hide any activity of…show more content…
Several financial reporting practices identified by Mr. Lee that violated Lehman Brothers’ code of ethics. There are six allegations included of his letter but one important of his allegations regarding agreements of repurchasing Lehman Brothers were executing was verbally mentioned when he was interviewed. He confirmed for the end of the quarter, and about a week later that roughly $50 billion was removing by Lehman account from the balance sheets, and come again the inventory back to the balance sheets (Repo 105). Mr. Lee’s interview about his allegations on Repo 105 was not informed to the audit director of Lehman’s nor never mentioned to the audit committee (D Searcy & Albrecht W S, 2003). To the ethical director, if Mr. Lee’s findings were brought up, of the Sarbanes-Oxley Act it is outlined in Section 301, then action of corrective would have penalized the people accountable for the behavior of unethical that occurred, prior to bankruptcy of Lehman’s. There could have been additional actions that could have taken place, to restructure the company, and avoid the event of unfortunate caused by a number of executives at Lehman
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