Nearly six years ago, I was cautioned against taking this job because, I was told, "Nothing exciting ever happens in the accounting profession," and that I would be bored to tears. Dissecting that misguided prognostication with a series of bullet points or a timeline of events would take far more room than I am allotted on this page. But if there is some sort of measuring stick that defines my tenure as editor, it would be the Enron debacle and the recent convictions of company founder and former chairman Kenneth Lay and former chief executive Jeffrey Skilling on an aggregate 25 counts of conspiracy and fraud.If there was one constant with my association here, it's Enron. From the moment the company imploded into one of the largest bankruptcies in corporate history, and terms such as "off-balance-sheet partnerships" became embedded into the lexicon of everyday folks, Enron became a lasting headline fixture on myriad business channels and publications, as well as here at Accounting Today.
As a test, I recently thumbed through a stack of back issues, and it was difficult to find even one that didn't at least have a news brief on the company, let alone a larger story.
Enron - and later the debacle at WorldCom - ushered in a whole new regulatory climate in the profession, as well as sounding an alarm for untold numbers of investors that it might not be such a bad thing to read the prospectus, or the management discussion and analysis in the annual report, more carefully.
The Enron aftermath restructured audit committees and, with a big assist from the passage of Sarbanes-Oxley in 2002, essentially changed the financial reporting process in this country. Once the country's seventh-largest company with a market value of $68 billion, Enron's bankruptcy eradicated roughly $1 billion in retirement funds. Class-action suits over the company's collapse have claimed that the energy giant's accounting fraud and earnings manipulations cost more than $25 billion. Enron was an unindicted co-conspirator in helping bring down one of the country's largest and oldest audit firms, Arthur Andersen.
Perhaps most galling was the continued insistence of both Lay and Skilling that negative articles and short-sellers were to blame for the company's collapse, and not one of the most egregious cases of financial fraud ever seen in the annals of American business.
If you delved even an inch deep into Enron, you could shred this duo's argument like - well, like the company's auditors did with reams of its workpapers.
It was a company with ruptured internal controls, and had a business model so complex that few outside the inner sanctum completely understood what business it was really in. It was a company that berated employees with the temerity to question its accounting practices, and painted a veritable Van Gogh with regard to its financial structure and condition, when in reality it required the rite of extreme unction.
Lay and Skilling are rightfully staring at triple figures in terms of prison terms. Their case will undoubtedly be appealed, but as one observer put it, you have a better chance of winning a Golden Globe than getting a reversal in the Fifth Circuit.
For me, it's the closing act of a five-year drama. I won't have Enron or Mssrs. Lay and Skilling to kick around - on paper, at least - much longer.
