The Enron Implosion and the Loss of Respect for the Accounting Professi

The Enron Implosion and the Loss of Respect for the Accounting ProfessionOn the surface, the motives behind decisions and events leading to Enrons downfall appear simple enough individual and collective greed born in an atmosphere of market euphoria and corporate arrogance. Hardly anyonethe company, its employees, analysts or individual investorswanted to believe the company was too good to be true. So, for a while, hardly anyone did. Many kept on buying the stock, the corporate mantra and the dream. In the meantime, the company made many high-risk deals, some of which were outside the companys typical asset risk control process. Many went sour in the early months of 2001 as Enrons stock price and debt rating imploded because of loss of investor and creditor trust. Methods the company used to disclose its complicated financial dealings were all impose on _or_ oppress and downright deceptive. The companys lack of accuracy in reporting its financial affairs, followed by financial rest atements disclosing billions of dollars of omitted liabilities and losses, contributed to its downfall. The whole affair happened under the watchful centre of Arthur Andersen LLP, which kept a whole floor of auditors assigned at Enron year-round.In 1985, after federal deregulation of natural gas pedal pipelines, Enron was born from the merger of Houston instinctive Gas and InterNorth, a Nebraska pipeline company. In the process of the merger, Enron incurred a lot of debt and, as the result of deregulation, no longer had exclusive rights to its pipelines. In station to survive, the company had to come up with a new and innovative business strategy to generate profits and cash flow. Kenneth Lay, CEO, hired McKinsey & Co. to assist in create Enrons business strategy. It assigned Jeffrey Skilling to the task. Skilling, who had a background in banking and asset and liability management, proposed a revolutionary solution to Enrons credit, cash, and profit worries in the gas pipeline business create a gas bank in which Enron would buy gas from a network of suppliers and sell it to a network of consumers, contractually guaranteeing both the supply and the price, charging fees for the transactions and assuming the associated risks. Thanks to the young consultant, the company created both a new product and a new paradigm for the sedulousnessthe energy derivative. Lay was so impressed with Skillings ... ... excellence stand in satirical contrast to allegations now being made public. Personally, I had referred some(prenominal) of our trounce and brightest accounting, finance and MBA graduates to Enron, hoping they could gain valuable experience from seeing things done right. These included a very bright training consultant who had lost her channel in 2000 with a Houston consulting firm as a result of a reduction in force. She has lost her second job in 18 months by no fault of her own. Other former students still hanging on at Enron face an uncertain future as the company fights for survival. The old construction goes, Lessons learned hard are learned best. Some former Enron employees are embittered by the way they have been treated by the company that was once the best in the business. Others disagree. In the words of one of my former students who is still hanging on Just for the record, my time and experience at Enron have been nothing curt of fantastic. I could not have asked for a better place to be or better people to work with. Please, though, remember this Never take client and employee confidence for granted. That confidence is easy to lose and toughto impossibleto regain.