Arthur Andersen's Troubles

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Arthur Andersen’s Troubles 1. Arthur Anderson (AA) should have been able to help prevent to some extent the Enron disaster, however, they either missed or ignored Enron’s manipulations allowing the fraud to continue as long as it did. AA contributed to the disaster by approving the structure of many Special Purpose Entities (SPE), which Enron used for off-balance sheet financing. The SPEs did not meet the requirements of an independent company and should have been consolidated with Enron’s financial statements. Shares transferred to SPEs were not valued on the financial statements in compliance with GAAP, and side deals between Enron and banks were not brought to the attention of the board of directors; these issues should have been…show more content…
The revenue motivation can also be seen by the lower investment of time in auditing to maximize profits. 4. An auditor should make decisions in the public interest rather than in the interest of management or current shareholders in order to maintain the trust of the public. Businesses and the public depend on each, the public wants the goods and services of businesses, and businesses need the money of the public. People will not want to buy the goods and services of companies they do not trust or feel they have been manipulated by. Investors will also not want to invest in companies who manipulate their financial statements. Auditors need to make decisions in the interest of the public so that the public is aware of the truth of the businesses being audited. The fiduciary responsibility of accountants is to the public, not to management and/or directors who have proven to be self-interested and untrustworthy. If there isn’t a fiduciary responsibility to the public, public expectations will not be met, corporate credibility will diminish, and the accounting profession will suffer once again for a bad reputation. 5. The AA partners responsible for quality control didn’t stop the flawed decisions of the audit partners because they were overruled. AA gave the power to the partner in charge of the audit to override a ruling of the

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