Arthur Anderson And Enron Essay

555 words - 3 pages

The job of Arthur Andersen was to make sure that investors could rely on Enron?s financial statements. Although Anderson is the smallest of the ?big five? accounting firms, it is still one of the nation?s largest accounting firms. Many say that after the involvement in the biggest bankruptcy in United States history, Anderson finds them in deep trouble. ?With its reputation badly damaged, Arthur Andersen faces serious problems. Its most talented employees might choose to leave. There is also the possibility of staggering liability claims. The Big Five could possibly become the Big Four? ( ).One of the questionable facts is towards Arthur Andersen?s independence in the Enron audit. They not only provided Enron with audit services, but also with non-audit services. Anderson was a major ...view middle of the document...

He has stated that auditing is the firm?s ?central and core responsibility.? Since Anderson and other auditors are under fire for alleged conflicts of interest between their duties in reviewing company balance sheets and bidding for lucrative consulting contracts that provide a large portion of their earnings, they have been protesting that auditing remains their primary focus ( ). These firms are actually rallying so that Congress will impose tight restrictions on the amount of non-audit work they do.As well as the question of the services that Anderson provided, there is another aspect to their independence that has been challenged. Some Andersen executives ended up taking jobs at Enron. Richard Causey, Enron?s chief accounting officer, and Jeffrey McMahon, chief financial officer, both worked for Anderson before moving on to Enron. The fact is that, it is far too common for an auditor working for a reputable large accounting firm to be considered for a position by one of their audit clients. This aspect of a question of independence is not valid when one considers how often this occurs within auditors and their clients.Arthur Andersen has admitted to the shredding of documents pertaining to the Enron audit. The head auditor Executives of public companies have legal and moral responsibilities to produce honest books and records, but at Enron they didn?t do that. To protect themselves, lenders are supposed to make sure that borrowers are creditworthy, but Enron lenders were as clueless of the actual situation as everyone else was. Auditors are supposed to make sure that a company?s financial statements not only meet the accounting guidelines but also give investors and lenders a fair and accurate picture of what?s going on. Unfortunately it seems obvious that Arthur Andersen failed that test.

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