Book Review: Following the Money - the Enron Failure and the State of Corporate Disclosure

6 Pages Posted: 22 Mar 2006

See all articles by Yuri Biondi

Yuri Biondi

French National Center for Scientific Research (CNRS)


"Following the money" presents a valuable and timely analysis concerned with the post-Enron state of corporate governance and disclosure. The authors, all leading experts in the field, synthesise the five accounting failures that emerge by the Enron affair and especially stress the use and abuse of fair value accounting, that constitutes a powerful means of achieving a misleading accounting representation without actually violating any rules. One of the key lessons the authors draw from is that "if accounting standards setters want to reduce the likelihood of future Enrons, they should abandon current efforts to rely further on fair values for financial reports".

According to the authors, to avoid further distress, accounting standards need not only to be reformed but also better enforced. Instead of advocating a biblical Babel's quest for a single set of accounting standards such as IFRS for all companies throughout the world, the authors pragmatically analyse the current situation and recommend that room be made for a moderate degree of competition among standards. In addition, they suggest a variety of non financial indicators that could help investors and analysts to grasp how the flow of economic activity of the whole firm actually generates the earnings reported. This non financial information may be disclosed in a form that will make it more available and users-friendly, using a common financial language designed for the Internet, called XBRL.

Keywords: Corporate governance, accounting reporting, accounting disclosure, fair value accounting, Enron, accounting and economics of the firm, accounting and law of the firm, firm as an entity

JEL Classification: A12, G14, K22, K42, L51, M41

Suggested Citation

Biondi, Yuri, Book Review: Following the Money - the Enron Failure and the State of Corporate Disclosure. Review of Political Economy, Vol. 19, No. 2, pp. 281-283, April 2007. Available at SSRN:

Yuri Biondi (Contact Author)

French National Center for Scientific Research (CNRS) ( email )

IRISSO - University Paris Dauphine PSL
Place Marechal Lattre Tassigny
75016 Paris


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