Question

To what extent would you place blame for the Enron scandal on individuals, on the culture at Enron, on lax regulatory oversight, on the failure of market discipline, the overall economic environment, etc.? If you had to assign blame to each contributory factor, what would be the rankings of the various causal factors? Justify your claims.

Answer 1

One of the major reasons for Enron failure was the shift in the accounting system. There was a shift in system from traditional one to Mark-to market one where in fair value is used instead of actual value. This kind of helped Enron in exaggerating their current income statement by recording unrealized gains/income.The other reason the market conditions at that time. 1990s was more of a bullish market which helped to foster Enron's rapid growth. The market boom had slowed by 2000 when its growth slowed down too. Also another reason could be the culture. Skilling had created a competitive culture where employess had to create maximum trades. This could also have been harmful for the company as this could have resukted in lack of proper checks and verifications. Another notable issue was where Enron transferred their so called debt/ trouble assets to some special purpose vehicles to hide it.Arthur anderson which was then Enron's auditor should also be blamed for as for not reporting the irregularities.