1.) How the fraudsters committed fraudulent acts?

Based from the video that I have watched, it all started when one of the
employees use the money of the company to gamble, and since it drastically
increased the money of the corporation, the management, particularly the CEO
Kenneth lay tolerated the act and instead of taking corrective actions, he even
encouraged gambling as he was bringing lots of money to the corporation. It was just
the beginning, because it was even more chaotic when Kenneth Lay appointed
Jeffrey Skilling as the new CEO. Skilling was known to be selfish and greedy. He
considered money as the only source of motivation.

Skilling implemented a rating system wherein employees rated with five are to
be fired. It pushed employees to work eighteen hours a day just to meet their desired
output and while doing so, committed fraudulent acts. The beginning of their ending
happened when Skilling implemented the mark to market accounting wherein the
assets of the company were measured not by its actual cost but by its fair value. This
system increased their stock price encouraging many people to invest their
retirement funds and other money, however, it is also prone to manipulation.

The management fooled regulators with fake holding and accounting. The
auditor, Arthur Anderson, was an accomplice of skilling. He forged the financial
information to attract investors. Those who dared to go against the management and
correct their mistake was also fired. This was how they committed fraud.

2.) How Enron Case affect the Accountancy Profession in the Philippines?
The Enron Case was known as the biggest fraud in the History and the
biggest corporate bankruptcy to ever hit the business world. It didn’t only affect the
United States but it also had an implication to other countries. The scandal gained
attention to accounting and corporate fraud which is why some policies were
strengthened and new policies were implemented. Increased regulation and
oversight was also enacted just to make sure that acts of frauds will be discovered
during auditing.
In the Philippines, new compliance measures and ethical standards was
adapted from the Financial Accounting Standards Board. It is to make sure that the
board of directors will become more independent, the auditors will be objective and
independent in demonstrating their responsibilities, and managers will execute
performance standards and everyone will adhere to the code of ethics.

In addition to the existing standards, the Philippine Securities and Exchange

Commission came out with its first corporate governance code in 2002. It was
revised in 2016 which is aligned with the ASEAN Corporate Governance Initiatives
and Best Practice from OECD and G20 countries. This new code puts more
pressure on the board of directors which aims to stop and prevent fraud.

3.) What is the relevance of the Enron Case to the External Auditors?
The Enron case was very important for the external auditors. External auditors
are very important as they give confidence and assurance to the investors that the
company is being managed accordingly and without any anomalies. In the Enron
case, we know that their external auditor was not competent and independent
enough to disclose everything that was happening within the corporation making
him an accomplice to the fraud. Because of that his reputation was tainted and he
also loses the trust of the people.

The Enron scandal reminded the external auditors of their responsibilities and
of the code of ethics. It reminded them of how important their jobs are because the
investors are highly dependent with their opinions. A mistake committed accidentally
or intentionally by them will greatly affect the shareholders who invested their money
in the corporation.

The external auditors are supposed to provide opinion on the integrity of a

company to help the investors and even the entity in making decisions. The Enron
case was a tool for the external auditors to improve their conduct of auditing and to
always apply professional skepticism and ethical and performance standards.

4.) What are the lessons we can get from the Enron Case?
The Enron case was a representation of how important is the job of the
management and auditor in the company. The scandal taught many companies to
remain ethical even when greed for power and money will arise. Since the
command will always come from the board, it needs to be a command for the
benefit of everyone including the investors. To facilitate that, the board must not be
easily swayed and blinded by money to avoid the downfall that the CEO’s of Enron
has done to their company.
The scandal was very important because it was the root for many standard
setting bodies to formulate and implement new sets of code of corporate
governance to make sure that such scandal will never happen again and to also
protect the interest of the investors. It will also serve as a lesson to the investors to
be very critical and careful in investing their trust.
We have to remember that committing fraud and deceiving others are against
the law. We shall remain decent even when we are tempted. If we saw something
irregularity and wrong happening in our organization, we should speak it up so that
our interest and the interest of other people will be protected. And lastly, we have to
remember our core, the reason why we are accountants or auditors, if we are one,
which is to disclose everything, good and bad happening within the organization,
because there are people depending on our abilities and we are here to serve them.