'External causes for Enron to collapse Essay\r'

'1) deregulating\r\nDe economy of the U.S. energy industry do possible Enron’s emergence as a major corporation, and also ultimately may necessitate contributed to its collapse. The social club successfully seized the opportunity created by deregulating to create a new logical argument as a market noble in natural gas and early(a) commodities. Enron successfully mildewd policymakers to exempt the attach to from unlike regulatory swayers, for example in the arena of energy derivatives. This allowed Enron to enter various art markets with virtually no presidential term inadvertency. Arguably, regulation might have prevented Enron from taking whatsoever of the risks and making some of the mistakes which it did. While deregulation may initially have helped Enron, by allowing it to create and enter new markets, it by and by hurt the company by removing the genuinely restraints that might have kept it from meet fatally overextended.\r\n2) Lax regulatory enforc ement\r\nArguably, presidency regulatory agencies failed to exercise sufficient oversight or to enforce the rules that were on the books. restrictive bodies that failed to enforce the rules governing Enron’s actions include the Securities and Exchange relegation (SEC), the Federal capability Regulatory Commission (FERC), and the Commodities Futures Trading Commission (CFEC).\r\n3) Weak and ambiguous bill standards\r\nHindsight makes it plum clear that the accounting standards promulgated by the Financial Accounting Standards Board (FASB) were also weak and likewise ambiguous with regard as to the complex trading transactions and pecuniary structures that Enron established and operated. Two areas stand disclose as ones of particular concern. First, the rules apparently permitted the general commit of market-to-market (MTM) accounting in areas for which it was not originally intended. Second, the 3 percent rule for immaterial ownership of SPEs was arguably too lo w to maintain genuine liberty. An vestigial issue was that corporate practice (e.g., sophisticated online trading of complex financial derivatives) had outpaced the movement of the rules makers, leading to the application of rules in situations for which they were not originally designed.\r\n4) A lack of independence on the part of the company’s auditors and law firms working for the company\r\nA key remote issue was date of interest on the part of accounting and law firms working for Enron. Arthur Andersen, the company’s accounting firm, arguably had a impinge of interest in that Arthur Andersen provided both external audit go and internal consulting for Enron. If Arthur Andersen were to altercate the propriety of Enron’s financial statements in its annual audit, it ran the risk of jeopardizing its lucrative consulting and â€Å" within” accounting work for its client. Moreover, relations amid the two firms were unusually close, possibly undermi ning Arthur Andersen’s objectivity and independence. Similarly, Vinson & Elkins, Enron’s outside law firm, was seemingly under twinge not to question the legality of the particular(a) Purpose Entities (SPEs) too closely, since Enron was a major client of the firm.\r\n5) Inadequate campaign finance and lobbyist rules.\r\nEnron made all-encompassing legal use of various techniques of political influence, including engaging the services of lobbyists, making extensive contributions to political campaigns, especially using soft money, and hiring former government officials. One of the external causes, then, may have been campaign finance and other rules that permitted much(prenominal) legal exercise of corporate influence in policymaking.\r\n6) Weak stakeholder oversight.\r\nA moorage can be made that external stakeholdersâ€especially large institutional investors such as pension and mutual currencyâ€failed to exercise due diligence. These institutional inv estors were golden to make handsome returns on their extensive investments in Enron in the late 1990s, but failed to become actively involved in corporate governance at the company until it was too late.\r\n'