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Dayag, Angelo Jade M.

November 21, 2014

BSA III 01

Prof. William Baltazar


Nightmare Dressed Like a Daydream
(Reaction Paper behind the Enron Corporation Scandal)

They say when someone is too good to be true, it probably is. But it is that
probably is one should, at least, start to doubt its over-all substance. Yes, its so nice
to see someone do well on their own career that they seemed to be almost perfect,
though sometimes their near perfection can be also considered as the major factor to be
leery about them unless someone will stand up bravely to question them. Hence, it is
the best thing that happened to a certain company who appeared to make the world
revolve around them ---- the Enron Corporation.
For the background of the company, Enron Corporation was one of the world's
largest energy, commodities and services companies before its Chapter 11 bankruptcy
filing. It marketed electricity and natural gas, delivered energy and other physical
commodities, and provided financial and risk management services to customers
worldwide. Based in Houston, Texas, Enron was formed in July 1985 by the merger of
Houston Natural Gas and InterNorth of Omaha. Kenneth Lay became Enron's CEO in
February 1986. In 1989, Enron began trading natural gas commodities. The company
eventually became the largest merchant in North America. Enron had 21 thousand
employees, operated a 25 thousand-mile gas pipeline system. It was listed as the
seventh-largest company in the U.S, with revenue of nearly 101 billion of dollars. Enron
owned power plants, water companies, gas distributors and other units involved in the

delivery of services to consumers and businesses. Its bankruptcy occurred on


December 2, where Enron had listed 24.7 billion dollars in assets. All of these are the
features of Enron that disappeared like froth. It reached dramatic heights only to face a
dizzying collapse. Many are affected especially the lives of the thousands of employees,
pension funds and shook Wall Street to its very core. It really is tear-jerking,
heartbreaking, tormenting or any other devastating adjective that can be supplemented
to how a company so big and so powerful disappeared almost overnight.
Auditing wise, the Enron implosion have wreaked also more havoc on the
accounting profession than any other case in U.S. history. It is only good that critics in
the media, Congress and elsewhere have called into question not only the adequacy of
U.S. disclosure practices but also the integrity of the independent audit process.
Therefore, the general public has the right to question how CPA firms can maintain audit
independence while at the same time engaging in consulting work, often for fees that
dwarf those of the audit. Companies that deal in special purpose entities and complex
financial instruments similar to Enrons have suffered significant declines in their stock
prices. As a result, the scandal threatened to undermine confidence in financial markets
in the United States and abroad.
Companies such as this are the inevitable conclusion of an unregulated capitalist
free market. Its because in a capitalist system, an inefficient money losing company is
supposed to go out of business. Enron's competitors are surely reaping the benefits of
Enron's ineptitude. Some crimes may have been committed in the process, which
should be investigated, but the bottom line is that Enron would be bankrupt even if it
had followed the letter of the law. Nevertheless, the companys failure in 2001

represents the biggest business bankruptcy ever while also spotlighting corporate
Americas moral failings. Its a stark reminder of the implications of being seduced by
charismatic leaders, or more specifically, those who sought excess at the expense of
their communities and their employees. In the end, those misplaced morals killed the
company while it injured all of those who had gone along for the ride. I also think that
this will remind a lot of large multi-billion dollar corporations that it doesn't matter how
established and powerful you are, you aren't anything without customers. Punishment
only serves as a deterrent. But a clear-cut mission and a corporate code of ethics is
crucial. Its the foundation to which boards, managers and workers rely when they reach
a fork in the road. Its the principles they use when deciding whether to emphasize
short-term gain or long-term stability. But the companys demise is not the end of selfindulgence. Its simply a milestone. And while lying and deceit will always exist, there is
a heightened awareness on the part of boards and investors. Without a doubt, corporate
cultures must reward ethical conduct and penalize wrongdoing at every turn. Values
matter: Ignoring trouble spots or blaming underlings is unacceptable.
The key to creating a just and ethical corporate culture is to breed fair and lasting
business principles. Indeed, companies will be measured by the traditions they build
and the way in which they manage their relationships with shareholders, communities
and employees. Enron has just proved and showed that they are like those of
nightmares that dresses like a daydream so please, though, remember this: Never take
customer and employee confidence for granted. That confidence is easy to lose and
toughto impossibleto regain.

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