Enron of Saudi Arabia: Corporate Accounting and Auditing Failures

Abstract

Accounting and auditing failures are still a hot topic despite strong efforts for efficient corporate governance. The motives and attitudes behind decisions and events leading to Enron’s eventual downfall appear to be simple. It is individual and collective greed born in an atmosphere of market loose of regulation. The financial results of the company were too good to be true and no sound was heard to criticize the company albeit very few opinions. It was a network to deceive stakeholders. Saudi Arabia government has sought to change its oil-based economy into a modern diversified economy with a more trend towards privatization consistent with 2030 vision “a vibrant society, a thriving economy and an ambitious nation” and in this situation an effective, transparent, accountable, enabling and high-performing government and corporations are an essential pillar for success in order to advance economy including stock market. Corporate governance is intended to increase accountability of corporations and to avoid problems before they occur. An accounting scandal at one of Saudi Arabia’s largest telecommunications companies is posing pressure on regulators, as Saudi Arabia moves to open up the Arab world’s largest stock market to foreign investors. The Capital Market Regulator in Saudi Arabia banned Deloitte’s firm (Bakr Abulkhair & Co.) from auditing public companies as of June 1st, 2015, on account of its work for the targeted loss-making company MMG (Mohammad Al Mojil Group). Another scandal in Saudi Arabia is Etihad Etisalat, known as (Mobily), as company’s audit committee pointed in their perspective to accounting errors that decreased about $380 million in previous profits. The aim of this research is to explore what went wrong and the violations of corporate governance rules by highlighting corporate accounting and auditing scandals in MMG (Mohammad Al Mojil Group) and Etihad Etisalat, known as (Mobily). Although what happened at Enron is very well known worldwide, the corporate accounting and auditing failures in the case of Saudi Arabia is unprecedented territory of research.