Learning from ENRON.

Abstract

By now, nearly everyone in the academic world will have heard of ENRON and other similar scandals that are shaking the financial sector. Some clever bookkeeping manoeuvres put a needed gloss on the company's accounts that helped to boost their stocks to new heights. But when examined critically, a rather different financial situation emerged, which was followed by a sharp dive in ENRON's share price and the ultimate collapse of the company. ENRON was not alone, as the recent fall in the stock market shows— many other companies have cooked their books over the last couple of years in order to improve their performance on the stock market. Indeed, a number of the current economic problems seem to stem from the fact that nobody knows when and where the next ENRON will come to light. It would also appear that even governments are willing to try financial sleight‐of‐hand tricks to put a gloss on their economic forecasts—either to help their re‐election or to comply with externally imposed criteria. As scientists we may sit back and watch with some bemusement—or even pleasure—how the once brash and mighty are falling. But …