Our argument-based analysis of the accounting expert witness testimony given in the
2006 criminal trial of Enron’s CEO, Jeffrey Skilling, and Chairman, Ken Lay,
highlights important issues in the reasoning process underlying financial reporting.
Two expert accounting witnesses testified that Enron’s financial reporting fully
conformed with US generally accepted accounting principles [GAAP]. We analyse the
experts’ evidence using the notions of warrant, qualifier, data and conclusion.
Although Enron’s accounting ostensibly conformed to GAAP, the company’s
financial reporting did not ‘present fairly’. We discuss the implications of this for
accounting standard setting, and for proposals in the International Accounting
Standards Board’s Discussion Paper of 2013 regarding the conceptual framework [CF]
for financial reporting. We recommend that a CF be installed at the top of any GAAP
hierarchy as the dominant item guiding standard-setting and professional practice. We
also recommend that the concept of faithful representation in any revised CF should
incorporate the notion of acceptable levels of accounting risk.