The Enron effect in the electric services and natural gas industry on accounting choices

Improving Client Internal Capability to Monitor Public-Private Partnerships Projects: A Review

“…"The concerns are not about technical abilities of the suppliers but rather the commercial and contractual maneuvering that is often employed at the expense of the overall project objectives" (Hall et al, 2003). In terms of financial reporting, "managers smooth or manage earnings upward to please investors" (Dechow and Skinner, 2000) cited in (Scott, 2009), however on the heels of the Enron scandal, these same managers adopted the opposite approach "to minimize wealth transfers from political solutions as predicted by the political cost explanation" (Scott, 2009). In the UK also, "the National Audit Office has also criticised the profits made by private companies on certain PFI deals (NAO, 2008) cited in (Parker and Hartley, 2003), this type of occurrences coupled with failures like those experienced in Enron where regulatory laxity led to the loss of billions of dollars in equity investments, retirement benefits and unquantifiable 'Social profit' has brought the issues of effective monitoring to the fore.…”

“…There has evolved new financial instruments developed by the private sector in collaboration with financial institutions to increase profitability and retain their shareholders. In a study by (Scott, 2009), he observed that during the post-Enron era, "firms used several accounting charges including special items, discontinued operations, asset write-offs and goodwill impairment charges to decrease reported income. Before political sensitivity, the majority of special items in the industry were income increasing".…”