The systemic and corporate issues of the company were to fire low performing workers and lavishly rewarding other workers. This only increased company’s expenditures. The other issue was mishandling of the special purpose entities and using it for enrichment of few of its workers and the inability to deal with the debt crisis within the company. The company also allowed individuals to use it for self-enrichment. Lastly, the generally accepted accounting principles are used to cover up the company’s financial disorder and it should not be the gospel of the company. Thus, financial officers should know how to deal with the real financial problem rather than living in assumptions (Fox, 2003).
Yes, there are a series of wrong things that Enron did, the generally accepted accounting principles are not the cause of the failure. Among the reasons to why Enron adopted the Generally Accepted Accounting Principles was to cover their financial incapacity for some time as they worked towards their financial revival. However, this did not mean that the company had to ignore other financial responsibilities. Skilling and Andrew Fastow were financial geniuses and could not lie that he was unaware that increased expenses incapacitated the company financially (Mclean & Elkind, 2004). Thus, his scheme of awarding the best performers lavishly was premature and totally unwise. Moreover, the special purpose entities were to help Enron balance its books. However, it overstepped its purpose and became workers enriching scheme. The workers paid themselves millions of dollars from the special purpose entities even if they invested their money in such entities. Though, Enron did not reflect its debts, the special purpose entities to a greater extent had a hand in the fall of Enron. Thus, the special purpose entities, Jeffrey Skilling and the chief financial officer Andrew Fastow were responsible for the collapse of Enron by overpricing its stocks and acquiring large amounts of money from Enron even when they did not indicate in its books.
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