Enron and World Com

In the book it states that it was questioned why Mr. Causey the Chief Accounting Officer never came forward with concerns (Brooks, 2007). 5. Ken Lay did not uphold his duty as a chair and CEO of Enron. He may have been misguided by Fastow, but I find it hard to believe that he knew nothing of the various schemes of buying and selling into companies that were basically owned by Enron without money invested to do this. He attended and met with the finance committee, as well as the compensation committee and knew where his money was coming form.

At the least, he should have seen the red flags or done something when Baxter and Watkins complained of wrong doing. He chose to ignore, and still be compensated knowing things were not right. He did not follow any code of conduct, and allowed others to bend the rules and chose to ignore what was going on (Brooks, 2007). 6. The governance failed on many levels. The board did not make sure the company policies has a solid code of conduct that was followed. The management was given fabricated and inaccurate financial reports, and management and auditors were engaging in behavior that was a conflict of interest.

This leaving the audits unbiased because of their interest as consultants. The auditor was also overlooking the SPE and other behavior that they were consultants on with knowledge that the funding and books were not properly handled. Finally, Fastow the CFO funded a SPE as an employee of Enron, and all parties knew this was wrong and looked the other way (Brooks, 2007). 9. Conflicts of interest activities for the executives consisted of executives improperly enriching several participating executives.

Allowing the overstating if revenue and profits, offsetting of losses in Enron stock investments in other companies, manipulating Enron’s stock, hiding debt or obligation to pay. The SPE activities were funded without the proper funding. Mr. Fastow appoints himself to head Chewco as an outside investor as he was an Enron employee. Hedge funds were created to basically protect Enron from losses thus misleading the stockholder. The Arthur Andersons conflict of interest was taking money for consulting and auditing knowing unethical practices were taking place.

Befriending and spending time with executives not allowing the firm to remain objective as they were auditing in SPE’s that they had consulted on. They removed partners that were not linked to Enron. Did not follow compliance with company policies, and had audit staff leaving Arthur Anderson to join Enron (Brooks, 2007). World Com 1. The executives and accountants improperly reduced operating expense by releasing reserves held against operating expense and improperly re-characterizing certain operating cost as capital assets overstating pretax earnings.

This went on for five quarters to make up the loss that the analysis projected to be profit (Brooks, 2007). 3The board of directors seemed to lack a board of directors and essentially was being run by two gentlemen. There needed to be more strength in this area of the board, and more internal controls. The accountants that were being asked to change financial statements needed to stand up and refuse to change what they knew was wrong and unethical by the GAAP guidelines and ethical standards they were taught as professionals (Brooks, 2007). The accountants seemed to be working under the direction off Ebbers and experts stated he dominated the company. They were working under a lack of code of ethics and maybe were afraid of him or his ability to let them go (Brooks, 2007). 5I think that Bernard Ebbers was a manipulator and bully that must have lied his way into this loan. He obviously had the most control in the company, and the board was not only manipulated by him they lacked a code of ethics as a guide (Brooks, 2007). Reference Brooks, L. J. (2007). Business & Professional ethics for directors, executives, & accountants (4th ed. ). Mason, OH: Thomson Southwestern.