Enron: did the financial reporting model really fail?

Enron's recent collapse is considered by many to be a classic accounting failure characterized by the inappropriate use of generally accepted accounting principles (GAAP) and questionable independent auditor performance. Enron's demise has resulted in a renewed call for the major reform of...

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Bibliographic Details
Published in:Commercial Lending Review 2003-03, Vol.18 (2), p.5
Main Authors: Barsky, Noah P, Catanach, Jr., Anthony H, Rhoades-Catanach, Shelley C, Thibodeau, Jay C
Format: Article
Language:English
Subjects:
Accountants
Accounting
Analysis
Business failures
Business metrics
Cash flow
Corporate profits
Disclosure
Earnings per share
Energy industry
Ethical aspects
Financial analysis
Financial disclosure
Financial performance
Financial reporting
Financial statements
GAAP
Gas transmission industry
Influence
Information professionals
Institutional investments
Profit margins
Ratios
Reforms
Scandals
Stock prices
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Summary:Enron's recent collapse is considered by many to be a classic accounting failure characterized by the inappropriate use of generally accepted accounting principles (GAAP) and questionable independent auditor performance. Enron's demise has resulted in a renewed call for the major reform of GAAP and the process by which accounting and reporting standards are created. Although the US Congress has quickly reacted to recent financial disclosure and auditing irregularities by enacting corporate oversight legislation (Sarbanes-Oxley Act of 2002), it remains unclear whether the current US financial reporting model needs a major overhaul. Many believe that additional corporate disclosures might have prevented the Enron fiasco. To provide insight into what additional disclosures might be needed, it is useful to examine just how the current US financial reporting model failed the markets in the Enron debacle.
ISSN:0886-8204