Financial Accountability

I love the Finance and Accounting class! Even the most dedicated CPA would agree that accounting is the most boring subject you could take (especially during the summer!). Which is why I think the professor is phenomenal because he manages to make it interesting while at the same time fun and engaging. To be sure, we're not learning how to do basic accounting, instead we're learning how to analyze financial statements and manage financial expectations. We're learning where the boundaries are and what rules to follow.

This is a really interesting topic in the post-Enron world. For example, how did Enron manage to hide its losses? Let's see if I can remember... Enron was showing revenue coming from sales to entities which were "sufficiently, but not totally independent" of Enron (these were the shadow companies established by Skilling and Fastow). However, because they were not really independent, Enron should've included their gains/losses in a consolidated financial statement. Basically these "independent" firms were taking the losses that should've shown on Enron's financial statements.

The lesson here is that, as future managers, we may find ourselves in a position where we could influence the financial reports of our companies. With the lessons from the Enron or WorldCom fiascos and Sarbanes-Oxley hanging over our heads, this is a pretty heavy burden...