Aggressive accounting hid liabilities, that were missed by auditors; complacent assumptions around the valuation of goodwill were evident. Political risk – The scandal shook the assumption that private sector management was inherently superior, and nationalization gained public support in the UK.
The case study provides a rare opportunity to explore the dynamics of a board that failed to identify strategic risks, and who missed warning signs, both oblique and explicit.
There are also learning opportunities around the valuation of goodwill, and auditing of complex accounts. Much detail is in the public domain, following a major Parliamentary inquiry.