INTRODUCTION
Enron scandal, series of events that resulted in the bankruptcy of the U.S. energy, commodities, and
services company Enron Corporation and the dissolution of Arthur Andersen LLP, which had been one of
the largest auditing and accounting companies in the world. The collapse of Enron, which held more
than $60 billion in assets, involved one of the biggest bankruptcy filings in the history of the United
States, and it generated much debate as well as legislation designed to improve accounting standards
and practices, with long-lasting repercussions in the financial world.
The Enron story is one of money and politics, which are two areas that embody the culture of big
business in America. The film does a great job of illustrating the laissez-faire culture that allowed Enron
to rise to prominence while simultaneously exposing the rabid fraud behind the façade of success.
HIGHLIGHTS - BODY
The rise and fall of Enron’s stock price is owed to each lies and scandals, committed not only by the
greed driven top management personnel’s, but also employees below management who I think were
pressured in committing unethical activities to avoid falling at the bottom 15% of the staffs, as it has a
consequence of being cut off.
One of the prominent personalities in the scandal was Jeff Skilling, who introduced Enron to mark-to-
market accounting; which now I view as a negative accounting practice. Mark-to-market accounting led
Enron to experience tremendous growth and its stock price rose to unappreciated heights, it allows
Enron to book profits in the present on future deals; which I think is the biggest flaw of the said
accounting practice, as it is very susceptible to fraudulent financial reporting. Combine this accounting
practice with little to no scrutiny from the government, which I could appreciate Skilling’s idea of a
perfect crime.
Fasto, hired by Skilling as the CFO, was commendable as he masterfully hid the Enron losses and
allowed the company to make billions despite a failed business model. His use of special purpose entity
to assume Enron debt was brilliant.
The real mvp though for me was Lou Pai, the invisible CEO. Knowing when to call it quits, with it bagging
$250 million dollars, and more importantly the most unharmed of all the executives from the company’s
collapse.
Another major part of the crises was Enron’s push for deregulation, which allowed them to control the
California energy market. The continuous push for deregulation and free-markets which allowed Enron’s
stock price to rise in the manner it did, was scarily puppeteered by Kenneth Lay, another key figure in
the scandal. He was able to maintain an image of righteousness while looting Enron and its
shareholders, which I got to admit was diabolically impressive.
CONCLUSION
The external and internal auditors played a vital role in this fraud because they don’t do any action to
address this act, they don’t even try to mitigate this, instead they just contributed on the falsification of
facts. The auditing firm considered more the benefits that they can get as this is one of their big clients
and set aside ethical actions in their field. On the other hand, I think Enron were fooled by their peak
and were tempted to do fraudulent acts to maintain its success. They wanted power in this particular
field that is why they deceive investors and traders. Moreover, part of management that were
responsible for maintaining good governance in the firm were also deceived, for sure they know about
the wrong doings of the company. Management has the full responsibility in providing the auditors with
facts that can strengthen the opinion regarding the financial statement that were being audited. I can
infer that both the management of Enron and the auditing firm had conflict of interest and agreed to
ignore falsifications in financial statements. This scandal should serve as a lesson to auditors and
regulators to not be deceived by any money or offers in order to commit unethical acts. They should
maintain professionalism in all things they do in their workplace, especially the auditors because their
independence and objective judgment are very important. However, the government should implement
more strict rules regarding this as well as the auditors. They should carefully observe that all standards
are being implemented. Lastly, Executive management should not use their powers and intelligence to
commit or falsify things just to maintain its success because that will be temporary and will absolutely
have its consequence.
