Smartest Guys in the Room Movie and Book Analysis
The book relies on evidence from parties who were directly involved in the company (were employees) as well as people’s testimonies presented during court’s proceedings. The book presents a detailed but step by step approach to the tremendous fall of Enron illustrating the malpractices in the accounting and reporting of the financial operations of the firm. The presentation and reporting did not show or reveal a fair view of the company’s operations as the reports contained created figures to show that the company’s operations were sound while in the actual sense they were not. The CFO ensured that creative accounting was put in to practice and this ensured that the prices of the stock did not fall in the stock market.
There were parties who could have given the green light to the investors or shareholders. This shows that there existed a relationship between the auditor and the firm which should not be there for a true and independent examination of the position and operations of the firm and a report thereof. The film, on the other hand, is not much different from the book itself as they represent the same subject. However, the film relies on videos or footages which represent characters showing their traits. In my own opinion, the film is an exemplary artistic work with no much exaggeration, humour and drama commonly evidenced in other films but a clear representation of the information and material intended to be communicated.
The film employs the use of showing in the video the behaviour of character rather than narrating it. For instance, the film shows in half a minute a stripper. Moreover, the film does not give more details on the concept of deregulation which is very key when discussing the Enron Company. The fall of the Enron Company was marred by malpractices. The malpractices raise a great concern on the ethics employed by the employees in discharging their duties. The ethical issues raised here include the following: The Company’s emphasis on competition and standards for measuring performance which included a rating of all employees made that the employees had to find a way of cheating in order to secure their jobs.
It aims at explaining what actually happened and how it did until Enron Company was declared bankrupt. Second, it targets the executives of different companies in the quest to try and prevent such situations from happening in the future of such companies. Third, it may also target other parties involved in daily operations of companies or firms such as employees to remind them of their role in whistleblowing when they deem that decisions made by their top executives could threaten the Company’s future. Nature of Fraudulent Activities The fall of Enron Company could be associated with many things but to be specific, it was caused by the transactions which were conducted against the statutes or the laws. This is commonly referred to as structured finance.
This would cause them to cash out their stock which would have decreased the price of the stock even further. The last option was to use structured finance which did not necessitate borrowing or issuing of shares. This was the option that Fastow turned to. This method requires the use of innovation and creativity in carrying out transactions. In this case, the company made use of the SPEs which covered the debts and any other financial shortcomings that might ruin its image. The auditor also would from time to time accept other assignments other than auditing work which eventually compromised his independence to express the true opinion as an independent auditor. The Enron’s Board: Even though the board was made of stars, they could not risk their jobs by challenging the manner in which the operations of the company were conducted.
It is important to note that the directors owe their existence to the CEO since he is the one who appoints. The appointment also comes with a good compensation and therefore the directors could not risk their jobs. In addition, they did not have much to lose even if the management was conducted in a manner that was not value adding and therefore they remained quiet. The cheating culture was cultivated in the firm and thus the final reported figures or revenues did not reflect the position of the company. Second, the other element is SPEs which were used to transfer the debts of Enron Company. Through the SPEs, the company was able to report fictitious revenues which convinced the financial institutions and the investors that the company was in a good position and was sound for investment.
The Role of auditors in the Collapse of Enron AA provided auditing services serving as both the internal and external auditor. It also provided services of consultancy to Enron. The audit firm responded to the fraud positively. The primary responsibility or duty of an auditor is to examine the statements of a company whether they present a fair view of the company’s performance and express an opinion thereafter. However, the audit company which is charged with the responsibility of highlighting irregularities responded by hiding or covering it up. AA went even to an extent of violating professional standards in order to cover a fraud (Auditing as well as Accounting standards). Reflection In my own opinion, the book/ film handles the ethical matters it raises in detail and sufficiently.
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