Enron

Enron’s Accounting Issues – What Can We Learn to Prevent Future Enrons

Prepared Testimony

Bala G. Dharan

J. Howard Creekmore Professor of Management Rice University

Presented to the US House Energy and Commerce Committee’s Hearings on Enron Accounting

February 6, 2002

Reformatted February 16, 2002, for public distribution. The testimony as submitted to the Committee can be found in the Committee’s archives of hearings at http://energycommerce.house.gov

Bala G. Dharan, PhD, CPA J. Howard Creekmore Professor of Management Jesse H. Jones Graduate School of Management, MS-531 Rice University, 6100 Main Street, Houston, TX 77005 Phone: (713) 348-5382 Fax: (713) 348-5251 E-mail: bala@rice.edu

Prepared Statement of Bala G. Dharan, PhD, CPA, Professor of Accounting, Rice University Enron’s Accounting Issues – What Can We Learn to Prevent Future Enrons Presented to the US House Committee on Energy and Commerce February 6, 2002

Mr. Chairman and members of the Committee, I want to thank you for inviting me to present my analysis of the accounting issues that led to Enron’s downfall. I am honored to be given this opportunity. I am Bala Dharan, professor of accounting at the Jesse H. Jones Graduate School of Management, Rice University, Houston. I received my PhD in accounting from Carnegie Mellon University, Pittsburgh. I have been an accounting professor at Rice University since 1982. In addition, I have taught accounting as a professor at Northwestern University’s Kellogg School of Management, and as visiting professor at the Haas School of Business at University of California, Berkeley, and the Harvard Business School. I am also a Certified Public Accountant and a Registered Investment Advisor in the state of Texas. I have published several articles in research journals on the use of financial accounting disclosures by investors. The Enron debacle will rank as one of the largest securities fraud cases in history. Evidence to date points to signs of...