Enron Case Study

Question 1

David Duncan had the responsibility of representing the interests of Arthur Andersen in Enron Company. Particularly, David was the head of the audit team auditing the company and was bound to maintain the highest ethical standards in the process. In addition, David had the responsibility of full disclosure to Enron’s management. In fact, it was David’s duty to ensure that the audit reflected the true state of the company’s records as well as proposing recommendations for sustainable growth. The auditor also had a responsibility to the stockholders in the nature of the disclosures (Kroger, 2015). In this regard, therefore, David was required to disclose the true nature of the company’s financial status to help in the stockholders’ decision making. David’s responsibility to the accounting profession was guided by the maintenance of professional ethics including honesty and trustworthiness. Overall, the auditor had the responsibility of maintaining a positive image of the accounting profession.

Question 2

Any lawyer, such as Nancy Temple, has the responsibility of maintaining high professional ethics in the course of their professionalism. Indeed, the case with Enron is such that the company was aggressive and was involved in fraud whose responsibility to conceal was held by the attorney. All lawyers are thus bound by a code of conduct that governs proper professional behavior including their relationship with people and society. One of the most common responsibilities includes the principle of fiduciary where the lawyer vows to act on behalf of the client (Shaw et al, 2010). In this regard, Nancy Temple had the responsibility of acting in good faith while maintaining the highest standards of professionalism. In addition, the attorney was required to conduct the obligation with candor, loyalty and care. Further, Nancy Temple was also required to maintain confidentiality by guaranteeing the privacy of all information shared between her and the client. As thus, any disclosure of the information to third parties must be through consent from Enron as the client.

Question 3

Whistle blowing, such as the one done by Sherron Watkins, is considered a moral responsibility of all employees. Therefore, the government protects such people from unfair treatment by the companies whose information they disclose. However, laws stipulate that the whistleblowers first report the wrongdoings to the relevant company management to protect employment rights. External disclosure is mostly favorable when there is no hope of action when reported within the company. In addition to this, the wrongdoing being disclosed must be in the public interest for it to qualify for whistle blowing. In this regard, therefore, the wrongdoing observed in the company must possess the capability of affecting others in the general public. The actions disclosed in the case study involved fraud which affected the general public including the shareholders. In addition, the action of the management constituted a criminal offence and the prosecution of the same was in the general public’s interest (Goodpaster, 2011). Although Watkins loyalty was owed to the company, she had a bigger responsibility to the general public.

Question 4

The functioning of any organization is largely dependent on the effectiveness of its board of directors. The decisions of the board of directors influence the direction of the company and determine the profitability of the company. In this regard, the board of director has a primary responsibility to the shareholders whose interests they must protect. The decisions passed by the board of directors must protect the interests of both shareholders and investors (Goodpaster, 2011). As currently constituted, there is no guarantee that the board of directors will have the interest of stockholders in their decisions. The government should regulate the constitution of the board of directors to include professionals such as auditors and accountants. For instance, the government should dictate that a position within the board be set aside for an accountant. Moreover, the government can tighten the noose on rogue board members by requiring for individual audits of the members. This can be done through rigorous exercises targeted vat members after the passing of controversial decisions that have wide implications on the company.

Question 5

The responsibility of ensuring professionalism and ethics within businesses is not a reserve for the management alone. In fact, the government, through its regulators, has a big responsibility to the business, the general public and the market. In the case study presented, Enron suffered from a lack of exercise of this responsibility leading to losses to the shareholders and a lack of trust from the general public. Despite the SEC through its chairman objecting to dual auditing activities, the Senate overruled the insights (Kroger, 2015). The very same issue of conflict of interest that led to SEC’s insights was used in deregulating the industry by the Senate. The government has the responsibility of ensuring the passing of the right legislation to safeguard the company’s sustainability. In addition, the government has the responsibility of stabilizing different markets by enacting laws that maintain healthy competition. By safeguarding the interest of investors, governments can ensure the sustenance of industries and markets. Moreover, shareholders of public companies form part of the general public and their interest in specific companies must be protected by the government. In this regard, the government should identify acts of fraud and notify the shareholders ion time to take necessary action.

Question 6

Accounting and law are some of the oldest professions and their importance in the world cannot be underestimated. However, with the increasing desire for success among businesses, the world has witnessed the partial transformation of the two professions into businesses (Goodpaster, 2011). Lack of professionalism in the two professions has continually threatened the sustainability of law and accounting as pure professions. That notwithstanding, law and accounting remain as professions and not businesses simply due to the evidence of codes of conducts governing the practice of the same. In addition, the fact that there are legal bodies that govern the practice of the professions makes them distinct from other businesses such as teaching. The individuals in these professions are bound to act within stipulated ethical concepts whose violations may result in disqualifications.

 

References

Kroger, J. R. (2015). Enron, Fraud, and Securities Reform: An Enron Prosecutor’s Perspective. U. Colo. L. Rev., 76, 57.

Shaw, C., Brimer, E., & Leo Cussen Institute. (2010). Ethical responsibilities of lawyers. Melbourne: Leo Cussen Institute.

Goodpaster, K. E. (2011). Business ethics and stakeholder analysis. Business ethics quarterly, 1(01), 53-73.

 

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