Business law Essay Example | Topics and Well Written Essays - 2000 words - 3

Business law - Essay Example After its establishment, Enron had adopted along with executed certain unethical accounting techniques with the specific objective of hiding its liabilities and other loses during the growth of its stock price. During this time, various experts of the US already provided warning to the company about its increasing debt, but Enron avoided this and moved on to the development of its business by making substantial investments. The financial collapse of Enron was a lesson for the other business houses prevailing in the US1. With this concern, the assignment focused on broadly discussing the unethical accounting practices conducted by Enron that made the company to face bankruptcy. The various responsibilities of the account practitioners in the company have been revealed in order to verify whether they are liable for leading the company towards facing bankruptcy or not. The prime objective of this paper is to determine that the conduct of unethical accounting practices had eventually mad e financial collapse of Enron. Case Background Enron had made a rapid growth since its formation. By the year 2001, it became the seventh biggest natural gas and electrical company in the entire region of the US. The scandal of Enron can be noticed for the reason of its increased level of earning business reputation and gaining substantial profits. After several years, Jeffery Skilling, the new CEO of the company appointed numerous skilled executives who were capable of hiding outstanding amounts that to be presented in the financial statements by using the methods of poor financial accounting. The company filed for bankruptcy in the year 2001 after experiencing a long-run loss in its business. It has been viewed that an increment in the annual revenue of the company was only US$ 9 to US$ 10 during the period of 1995 to 2000. This represents the loss that suffered by the company while conducting its business. It can also be viewed that the stock price of the company had a drastic fa ll from $90 per share to $1 from the middle of the year 2000 and lasted up to 2001 which created a great loss for the shareholders. After this incident, Enron checked its financial statement for the last five years and came to realize a total loss of $586 million2. Due to this heavy loss, Enron filled bankruptcy on December 2, 2001. It can be apparently observed that several problems faced by the company and its shareholders after the bankruptcy. In this regard, most of the employees of Enron were accused with charges and had been imprisoned. Enron lost a huge figure of customers due to bankruptcy and also for a case which was running in the US Supreme Court. The court ordered to pay back the customers with partial return. Being unable to overcome all these losses and negative reputation, Enron failed to restore its previous position in the market where it operates. In relation to the case of Enron, it can be affirmed that there were several reasons for which the company had experie nced bankruptcy. One of the major causes was the practice of unethical accounting practices that prevailed within the company. In this similar concern, the company adopted certain unplanned measures of financial reporting in order to hide the