S44 SPFINACC (3rd Term: 2018-2019)

Rodriguez, Niña Carmina R.

Date Submitted: 01 June 2019

Title : Individual Reaction Paper on Enron Case

Background :
The Enron Corporation was a publicly-listed company that operated for almost sixteen (16) years and was well-
known in the US business industry due to its bankruptcy in 2001. For majority of the company’s operating years,
their management was able to withhold their actual financial situation by using un-ethical accounting practices (i.e.
off-balance-sheet special purpose vehicles – also known as SPEs) – which are considered legal but can be used as a
way to hide the actual financial situation of the company – for the benefit of its management and false information
of its creditors and employees. By year 2001, Enron Corporation officially filed for bankruptcy, resulting to federal
investigations that found its management guilty of criminal charges like conspiracy, fraud and insider trading due
to the company’s corrupt business practices. By 2011, Enron Corporation was able to pay off its creditor to an
approximate amount of $ 21.70 B.
Insight/Reaction :
I am 100% against the un-ethical accounting practices that were performed by Enron Corporation – not only to lure
potential investors and creditors to help fund their business and its subsidiaries but equally important is the
repercussion these schemes caused their former employees. Hundreds or thousands of people lost their jobs, their
ability to provide for their families because the company that they have trusted and worked for was dishonest in
their business practices. To further aggravate the situation, it must have been difficult for these employees to find
new jobs because of their former company’s tarnished reputation.
Recommendation :
Since the Enron Corporation, regulations have already been set in place to prevent companies from these un-
ethical accounting practices – meant to deceive the company’s employees, creditors and investors. I recommend
that these regulations be applied as well to the Philippine setting – where in private and publicly-listed companies
should present their financial situations with accuracy and disclosure. Additionally, due to the emergence of
MSMEs, it is more important than ever to be transparent in the reporting of accurate financial situations because
its effects is not only limited to the company but to the entire business industry.
Conclusion :
It is important that when presenting a company’s actual financial situation, the accounting practice should be
exercised with the value of Indifference – where in the accounting professional should consciously distance his or
herself from situation, people and context that can influence her judgment on reporting or documenting the real
financial situation of the company.