Enron was an energy company based in Texas that was widely regarded as a business leader. But, Enron went bankrupt in 2020 when its top management falsified their financial statements to cover up the significant amounts of debt (Jacoby and others, 2020). In order to protect its shares and preserve its value, the company hid its actual financial report. After the scandal became known, Enron’s share price plummeted from $90.75 (December 2, 2001) to $0.26. Enron’s leaders provided financial data that was distorted and untrue to stockholders in order to conceal their misconduct. The corporate leadership had to provide honest and trustworthy financial information. However, senior managers conspired with outside auditors to trick authorities into believing they had falsified financial records (Edwards and al. 2019, 2019). In order to hide this truth from shareholders the CEO selected the wrong accounting revaluation methodology.
Enron’s chief executive was sent to prison for 24 years following the incident. Enron was sentenced to more than 35 million dollars for accounting violations. Enron CEOs and top executives were sentenced to prison and severe punishments by the courts. The senior leaders had to make sure shareholders received accurate financial information. However, the CEO conspired with other senior executives and external auditors to falsify a company’s financial statements and misrepresent its financial status (Bhaskar Flower, & Sellers, 2019). To submit incorrect financial information, it is against the law to collaborate with auditors. The top executives of large companies protect and promote shareholders’ interests. They should therefore be held responsible if they ignore or compromise the corporate strategic goals.
Companies can create internal audit and quality assurance departments which evaluate their internal processes. This will allow them to self-regulate in order to be ethical. Internal audit departments allow for continual oversight of corporate financial records, growth and avoidance of compromises. Internal control allows for the prompt identification and analysis of operational and financial risks and provides a means to respond quickly. For prominent individuals to be held accountable, corporate internal controls must work with the government regulators. For the protection of the public interests, it is crucial to monitor government agencies and ensure that their executive leadership are held accountable before the board and any other stakeholders. Collaboration with government agencies improves accountability and opensness.