Question

What role did the bankers, auditors, and attorney’s Enron worked with play in the company’s demise?

Answer 1

Enron's bankers, auditors, and attorneys contributed to Enron’s demise in several ways.

The accounting practices Enron was guilty of were fraudulent to say the least. The company had,“established the SPEs to move assets and debt off its balance sheet and to increase cash flow byshowing that funds were flowing through its books when it sold assets” (Ferrell, 2017, p.496).This reporting did not reflect the company’s actual financial situation. Enron was able tomaintain the level of financial fraud as long as stock price remained high at Enron. Once thestock price fell, Enron did not have the funds to compensate the downfall.

The congressional investigators found that “Enron's auditors knew in mid-August of asenior Enron employee's concerns about improprieties in the energy company's accountingpractices” (Oppel, 2002). The Auditors looked to Enron’s lawyers for guidance on the issuewhich they then decided to stick with Enron’s financial reports. It wasn’t until November, “whenthe accountants forced the company -- by then under investigation by the Securities andExchange Commission -- to restate five years of results and erase almost $600 million inreported profits” (Oppel, 2002). All of that aside, the auditors also destroyed documentspertaining to Enron’s financial scandal, making them an accomplice in the whole cover-up.