Enron Corporate Compliance Benchmarking Paper
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Enron Corporate Compliance Benchmarking Paper
Many companies are involved positive and negative risk that it takes. Enron was a company caused by poor corporate governance. It has also triggered a flood of legislative and regulatory changes and codes of conduct across the developed and emerging worlds to improve systems for ensuring that public companies are run properly in shareholdersÐ¿Ñ–Ð interest (Good practice boost performance. Euromoney, [serial online]. September 2003). The situation Enron faced as a company was alleged corporate fraud. It responded by ensuring that the company rules and policies were updated with the standard set by Sarbanes-Oxley requirements. The outcome for Enron is to build the company back to the original foundation that it was started from.
Situation of Enron
Enron was a financial scandal that was reveled in the late 2001. After a series of revelations involving irregular accounting procedures bordering on fraud, perpetrated throughout the 1990s, involving Enron and its accounting firm Arthur Andersen. Enron filed for bankruptcy on December 2, 2001. EnronÐ¿Ñ–Ð…s plunge occurred after it was revealed that much of its profits and revenue were the result of deals with special purpose entities (Enron scandal 2001.). Enron as a company had many unresolved problems dealing with financial scandals. Not having the right people in management cause Enron to have a lose-lose situation.
Responding to the issue
To resolve the problem at hand Enron sought out for help. A few days into November 2001 it became known that the Enron management had been aggressively pursuing new investment or an outright buyout (Enron scandal 2001). Its management apparently found a buyer when the board of Dynegy, voted late at night on November 7 to acquire Enron Ð¿Ñ–Ð…at a fire-sale priceÐ¿Ñ–Ð… or about eight billion in stock. Dynegy would also be required to assume nearly $13 billion of debt, plus any other debt hitherto occulted by the Enron managementÐ¿Ñ–Ð…s secretive business practices, possibly as much as $10 billion in Ð¿Ñ–Ð…hiddenÐ¿Ñ–Ð… debt. Commentators remarked on the different corporate cultures between Dynegy and Enron, and on the Ð¿Ñ–Ð…straight talkingÐ¿Ñ–Ð… personality of the Chief Executive Officer (CEO) of Dynegy, Charles Watson (Enron scandal 2001).
Outcome of Enron
After all the lawsuits that were filed against Enron it is still life for the company. Because it is involved in public governance it had to steppe up its game plan. Enron had to re-evaluate its structure as a company. Now, Enron have place updated its policies to conform to Sarbanes-Oxley requirements. As a company Enron have develop and promoted a strong internal control systems. Lead from the top and set the tone by example. It has hired and uses professionals as appropriate and values their input and implements their suggestions (Piazza M. Life After Enron and Worldcom. April 23, 2007). By making different changes Enron will be able to rebuild its company back in the right structure.
In conclusion, Enron was a company that took many negative risks. One lawsuit accuses 29 of these executives and directors of insider trading and misleading the public. As a company by taking a positive or negative risk can effective the company, employees, and society. Thousand of Enron employees and investors lost all their savings, childrenÐ¿Ñ–Ð…s college funds, and pensions when Enron collapsed. Enron should have had a tighter lock on its management to follow the rules and regulations of Sarbanes-Oxley. As a company it could have taken extra steps to have classes for its management to ensure that the regulatory laws were not broken.
Enron Fallout; Regulatory Changes. Practical Accountant [serial online]. March 2002; 35 (3): 21.
Available from: Business Source Complete, Ipswich, MA. Accessed December 11, 2007.
Enron Scandal, 2007. Retrieved online: www.en.wikipedia.org/wiki/Enron_scandal.
Good practice boosts performance. Euromoney [serial online]. September 2003; 34(412): 222-
241. Available from: Business Source Complete, Ipswich, MA. Accessed December 9, In the wake of high-profile corporate scandals and subsequent regulatory legislation, reporting internal controls has become a requirement. These requirements have led to organizations viewing risk management as an area of vital importance. Best practice organizations have for years looked to the Committee of Sponsoring Organizations of the TreadwayÐ¿Ñ–Ð…s (COSO) Internal Control Integrated Framework as the standard to build a solid system of internal controls (Managing Risk, 2003). Formed in 1985, COSO is a voluntary and independent private sector organization that sponsored the National Commission of Financial Reporting. The National Commission was made up of various industry representatives who studied the underlying causes that lead to fraudulent financial reporting. The committee developed recommendations for public companies, independent auditors, regulators, and educational organizations, which are designed to improve Ð¿Ñ–Ð…the quality of financial reporting through business ethics, effective internal controls, and corporate governanceÐ¿Ñ–Ð…(COSO, n.d., 1). Recognizing the need for organizations to evaluate risk management efforts, COSCO developed a framework for Enterprise Risk Management (ERM) that Morrison Management Specialists and other companies can use to establish strong internal controls.
Enterprise Risk Management
ERM is a controlled approach to help management identify and manage uncertainties and reach certain risk objectives. COSOÐ¿Ñ–Ð…s ERM framework concentrates on the development of a strategy that includes the importance of a risk and internal control Ð¿Ñ–Ð…consciousnessÐ¿Ñ–Ð… throughout an organization. COSOÐ¿Ñ–Ð…s framework introduces eight key principles for ERM: Ð¿Ñ–Ð…internal environment; objective setting; event identification; risk assessment; risk response; control activities; information and communication; and monitoringÐ¿Ñ–Ð… (Managing Risk, 2003, p. 2). COSOÐ¿Ñ–Ð…s framework also includes four objectives categories; these are: strategy; operations; financial reporting; and compliance. COSCO intended this framework to be an effective tool for keeping stakeholders and board directors informed about organizational procedures and processes. The framework could also be used to help an organization