Final Reflection

Posted: March 27th, 2020

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Final Reflection

Personally, I think that the collapse of corporations has always been an issue as far as accounting is concerned. This is primarily due to the role that the profession assumes in ensuring the accuracy and correctness of financial reporting for business entities. Unfortunately, many organizations tend to favor the creation of economic or financial gains over the adherence of ethical principles – a factor that often complicates effectiveness in the field of accounting. From a personal perspective, it is simple to notice the extent to which accountants are often viewed in a rather “whistle-blowing” manner because of the role that they assume as an organization’s innate financial oversight authority. Despite such responsibilities, accountants have been involved in the development of corporate collapses over the years as an outcome of greed as well as pressure from other stakeholders to alter financial documents in favor of profitable gains.

A good illustration of the role that accountancy has assumed in corporate classes involves the example of Enron Corporation. In fact, the role that accounting assumed in the collapse necessitated the creation of regulations such as the Sarbanes-Oxley Act of 2002, which established new and stricter rules centered on financial reporting (Pietra, McLeay, and Ronen 68). Before its collapse, Enron was recognized mainly for its inventiveness in the energy sector. Being among the biggest companies in the United States, Enron was responsible for the provision of retail energy, wholesale services, and transportation and broadband services. Nonetheless, Enron managed to attain a considerable reputation within the corporate context because of its flaws, which allegedly arose from ineffective corporate governance (Cuong 589). In this respect, I believe that the idea of corporate governance emphasizes further focus on the challenges and issues that usually affect the field of accounting.

The issues facing Enron were akin to organizations within the contemporary setting. From the experiences that my mentors told me, companies such as Enron are simply an illustration of the way accounting – while a noble profession – can actually be used to satisfy the personal interests of a few people in the firm. Apparently, since the goal for most firms involves making profits, many firms engage in unethical practices that usually involve the presentation of falsified financial and accounting reports. For Enron, this was true since the corporation engaged in the manipulation of its financial transactions to maintain a positive reputation and encourage significant investment. In addition to this, the manipulation led to the adjustment of financial statements, which proved essential to the firm’s commercial gain albeit the unlawful and unethical nature of the accounting practices that were involved (Clarke, Dean, and Oliver 123). This coupled with the tinkering of financial reports and transactions contributed to the collapse of the Enron.

With the way corporations fall these days, it is easy to notice the extent to which accounting can assume an essential role in the collapse of corporations. However, based on my few experiences, I was able to learn the extent to which accounting relies largely on ethics and principles rather than the satisfaction of personal interests. I also learnt that firms, which concentrate largely on profit maximization, are more liable to commit unethical accounting practices. As a result, the emphasis is placed on the adoption of a strong moral and ethical position despite the level of expertise that a person possesses with respect to the field of accounting. While the adoption or possession of sturdy ethics and morals is a single factor as far as effectiveness in accounting is concerned, it illustrates the level to which it is imperative in orchestrating or limiting corporate collapses.

Works Cited

Clarke, Frank L., G. W. Dean, and K. G. Oliver. Corporate Collapse: Accounting, Regulatory, and Ethical Failure. Cambridge, UK: Cambridge University Press, 2003.

Cuong, Nguyen H. “Factors Causing Enron’s Collapse: An Investigation into Corporate Governance and Company Culture.” Corporate Ownership & Control, vol. 8, no. 3, 2011, pp. 585-593.

Pietra R. Di., Stuart McLeay, and Joshua Ronen. Accounting and Regulation: New Insights on Governance, Markets, and Institutions. Springer, 2014.