Enron


I would like to blog about how Enron was able to submit false financial statements for so many years. Since Enron was such a large player in the energy market, I would think their financial statements would be analyzed the most. I don’t think the excuses that Enron’s senior executives were intimidating and their balance sheets were very confusing are valid. I think a good example that is comparable to Enron submitting false financial statements is Major League Baseball allowing Mark McGuire to break the home run record when he was on steroids. How can a respectable organization like the MLB not test a person like Mark McGuire for performance enhancing drugs and allow him to ruin the game of baseball. Similarly, there has to be smart financial people all over the country that could have looked at the financial statements of Enron and proved how illegitimate they were. Submitting false financial statements and using steroids in baseball give you an unfair advantage over your competitors. Unfortunately, Enron was able to get away with these incorrect financial statements for over ten years. I also was very happy to read that Lay and Skilling are in jail for their actions. They were able to make large amounts of money by privately selling large amounts of stock in the company in 2000 and 2001.

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2 Responses to Enron

  1. rhe005 says:

    I think both of these incidents of overlooking cheating were due to the lack of a history of the problem. In Mark McGwire’s case, at the time he broke the record, steroids had yet to be recognized as a serious problem in the MLB. So someone in the league, at that time, trying to argue that McGwire needs to take a drug test would be a tough argument to win. This is also true in the Enron case, although slightly less so. It would be tough for someone to win the argument that auditors needed to keep digging to find and prove that Enron was submitting false financial statements when there were not many mainstream examples of a company doing something like this.

  2. cornerback5 says:

    I can see how Enron was able to get away with submitting “shakey” financial statements. The bottom line is that when you are as big as Enron, you probably have made plenty of connections in the right places. I also believe that no one was brave enough to call them out on their records for all those years because they were “Enron”, the largest player in the energy market. Furthermore, for a company like Enron, I find it hard to believe that every single detail of their financial statements could be properly reviewed and analyzed. Maybe if new regulatory rules were issued that stated a company has to have a different set of independent auditors review their statements every certain amount of years, then the problem could have been dealt with because a fresh set of eyes could have caught the problem.

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