Question

 read the article “Ethics In Accounting: The Consequences Of The Enron Scandal.” This article is part of the readings for the week and can be found through the DeVry online library. Let’s point fingers for a minute. Who is to blame for Enron? The executives? The Board of Directors? The auditors? Tell us what you think

Answer 1

Let’s understand the case and analyze what happened actually:

Enron was the seventh biggest company in the US. It was valued at nearly $70bn. suddenly it collapsed in what now appears to be a monstrous accounting fraud. The fact that the fraud seems to have been mostly conducted in accordance with US GAAP does not help either the accountancy profession or Enron's auditors.

The competition authorities, especially those in the EU, will be unhappy that the Big Five have suddenly become the Big Four, but there will not be a lot that they can do about it. Andersen in the US has no foreseeable independent future. This means that Andersen in the rest of the world has no foreseeable independent future either. Big Five firms pitch their services at large multinational companies; that offer lacks credibility without a large presence in the US. Andersen outside the US is therefore forced to find another Big Five firm that it can attach itself to.

Different countries may go in different directions and even within a single country the various parts of the business may go separate ways, but they will all have to find a new home. The competition authorities may want to spend some time investigating matters and assuring themselves that there are no other options, but that is the conclusion at which they will eventually have to arrive.

It is not a common problem it is responsible for all. I here sharing my views on the case in different responsible person’s point of view:

Board of Directors:

The CEO was responsible as ultimately it was CEO Jeffrey Skilling that decided to fudge the numbers by keeping the extent of Enron’s debt off the books.

The CFO Andrew Fastow was clearly involved in the fraud as he doctored the books and mislead the Board of Directors and the auditors about the companies’ liabilities.

Arthur Anderson while not involved in creating the fraud, shares some responsibility for not detecting it, and for allowing the Enron Executives to bully them into accepting audit irregularities. As the auditor they had an obligation to dig deeper but were hesitant to do so because they had lucrative consulting contracts that were ongoing with Enron.

Key executives:

Enron’s top executives, mainly Lay and Skilling, are mainly to blame for the Enron collapse. As intemperate leaders, Lay and Skilling were surely able to lead an effective and efficient company, but they lacked self- control and in turn followed a path down a slippery and slimy slope to disaster. They fostered a competitive environment that crushed any little creativity employees had and had them constantly worried about the permanence of their job. Not only were Enron’s top executives intemperate, they were also just plain toxic. Lay blatantly lied to employees, sending emails of false hope. He also conned his employees into keeping any and all stocks they held in the company all the while he sold millions of dollars’ worth of his stock. As employees of Enron, many were making a decent living. Many shut themselves off from the utter corruption they saw. Speaking out would surely cost them their jobs and possibly their child's college fund. Looking back, many would want to say they would have been the whistle blowers, they would have spoken out, but personally I don’t think I would have. Maybe if I did not have a family or anything to live for I would, but I do. It may be selfish, but I believe too much was at stake.

Auditors:

I also find that the auditing firm Arthur Anderson played a key and pivotal role in this collapse. Ordering all Enron related documents to be shredded after the scandal illustrates just how toxic this firm was in the grand scheme of events.

Sometimes the view like no one will responsible:

No one person was responsible for Enron's bankruptcy. As with nearly all bankruptcies of large companies, whether fraud and other wrongdoing is a factor or not, no one factor caused the company's downfall. Rather, a long series of market factors, internal decisions, etc. put the company onto the road to bankruptcy and usually those actions happen over a long period of time.