In: Accounting
Suppose there is uncertainty about the amount of inflation that will occur during the time period between the signing of contracts. Arthur Andersen LLP was the auditor for Enron was engaged in unethical practices of manipulation of the financials accounts of firms that they were auditing for their personal benefits. The management of the company abandoned the basic standards of accounting on the integrity and caused a non-compliance that existed different than SEC or GAAP standards on reporting. The company's management was succumbing to dishonesty, manipulations and greed by secretly exercising stock options and created faulty financial statements that enabled to hide debt in billions of dollars. The unethical practices in the company were brought to the notice of the top management in regard to the conflict of interest; however instead of rectifying the concerns, they preferred to avoid the situation. With this approach they showed no respect to the notion of conflict of interest. It was unethical to remove the auditor as well as any hard copies that indicated the conflict of interest. The bankruptcy scandal had it's impact not only on Enron and it shareholders however there was a negative impact in the entire market as it lowered the company’s values that were in the similar industry.