Arthur Andersen & Co.

and
Enron Scandal

Emily Thomas, Sam Glover, Brett
Herron

"The far-reaching impact of Enron's collapse clearly
highlights the need for such an organization. Issues of
jurisdiction, funding, governance, and legal protection
are complex and they certainly need to be explored.
Such an investigative board would emphasize forward-
looking lessons that can improve the efficiency and
integrity of the entire capital market system.

-James Copeland, CEO of accountants Deloitte and Touche
Audit
Audit
Interim Review
Hard Close
Final
Stakes

Conflict of Interest
Arthur Levitt
Big 5
Proposed Law
Intensive Lobbying Campaign
$27 Million

Management Consulting
Best Practices
Analytical Techniques
Change Management
Technology Implementations
Strategy Development

Background Info
Arthur Andersen is an accounting and consulting
service that operates businesses throughout the
US & world.
The 89 year old company was apart of the Big
5 accounting firms.
Main headquarters are in Chicago, Illinois and
Houston, Texas.
Enron, the large energy corporation, has been a
client of Andersens for 16 years up until Enrons
2001 bankruptcy.
Background
In the past, Arthur Andersen has been linked to
the CIA and Mafia of Chicago.
Andersen covered up a massive embezzlement
of the First National Bank in Chicago in the 70s.
It was apart of an underground espionage
operation in Greece.
Andersen is thought to have done questionable
accounting for Enron, which hid millions of
dollars of debt from the public.
Timeline of Scandal

In the summer and fall of 2001, Arthur Andersen
foresaw government litigations and
investigations against Andersen and Enron.
October 16
th
,2001- Enron issued a press
release announcing the companys $618m net
loss for the 3
rd
quarter of 2001.
On the same day, Enron reduced shareholders
equity in the stock and the stock price
plummeted.
Timeline Cont.
October, 2001- Enron informs Andersen to
destroy all paper documents and emails
concerning Enron.
Shortly after, the SEC starts an investigation of
the two companies.
Lawyers defending Arthur Andersen argued that
shredding documents was a routine practice.
Eventually, Andersen was charged with
obstruction of justice for destroying the
documents before the collapse of the energy
giant.
What will happen?
Many of Andersens auditing clients are choosing other accounting
firms to perform auditing work. Andersen has lost over 130 publicly
traded corporations. Firms like Oracle, International Paper, Sara
Lee, Newell Rubbermaid, Federal Express, Delta Airlines, and
Waste Management are choosing other auditors.

Already attorneys for Enron shareholders and creditors have
reached a tentative agreement to cap payments made by Andersen
and their insurance company to between $250 and $300 million.

A large number of partners and employees have either gone to work
with other accounting firms or are considering leaving Andersen.. In
a recent move to reduce costs, Andersen laid off 7,000 employees.
Loss of quality employees may hamper Andersens ability to retain
current clients and obtain new clients in the years ahead.

major blow accounting firms worldwide

sparked a wider debate about auditing practices
in general.

Possible that financial markets need an
independent regulatory body, capable of both
investigating disasters (such as Enron & AA)
and preventing their recurrence.

Discussion
How did the Enron meltdown affect the employees at Arthur
Andersen? How did it affect the employees at Enron?


Lenders, investors, the accounting industry, and the nations
economy have also been affected by the Enron scandal. How were
each of these groups affected?


Many of the decisions relating to the Enron meltdown have ethical
implications. Assume that you were in charge of the Houston-based
auditing team that examined Enrons accounting records. As a result
of your work, you know that some of the accounting information is
questionable and could damage Enrons reputation. If reported, this
same information could lower Enrons stock value and hurt both
investors and employees with pension plans heavily invested in
Enron stock. Would you report this information or would you keep the
information to yourself?


Bibliography

http://www.accountancyage.com/News/1129120

www.ncpers.org/PastConf/ html/an2002_14.html

http://college.hmco.com/business/phk/business/7e/students/andersen.html

http://www.opensecrets.org/news/accountants/index.asp

http://en.wikipedia.org/wiki/Arthur_Andersen

www.strangecosmos.com