The Enron Scandal Of Enron

1052 Words Jan 16th, 2016 5 Pages
Public accounting firms have long played a role in convincing the public the authenticity of the corporates’ financial statements. However, the public started to become skeptical about accountants’ reliability when the Enron scandal occurred. In October 2001, SEC started an investigation against Enron for improper accounting practice. According Sherron S. Watkins, the former vice president for corporate development, Enron failed to disclose complicated deals with its partnerships to inflate the stock price. In a report by Enron’s law firm, Arthur Andersen, the accounting firm that was in charge of auditing Enron, was involved and failed to report the partnership transactions, which resulted in the collapse of Enron.
Many believed
…show more content…
It is no doubt that Arthur Andersen (AA, hereinafter), Enron’s auditing firm, have violated many laws and rules prior to and during the investigation. Thus, our group does not believe there is anything that could argue for them from an ethical point of view. From the case that we read, it is clear to everyone that AA’s senior level management knew most of the intentional misstatement in Enron’s financials, yet they still issued an audit report that does not include any of the information. Furthermore, when SEC initiated the investigation over Enron, instead of cooperating with the SEC and turn in the evidence of fraud, AA’s Enron auditors shredded thousands of pages of evidence, made the entire process much harder for SEC. Both actions are alterations of the general public’s interests, and thus, are unethical.
There are several things that could have helped to prevent the auditing fraud in the accounting profession, and many of which have already been in effect following the Sarbanes-Oxley Act. Most of these actions are to increase the standard of independence in an auditing process. The main reason why Arthur Andersen was not disclosing material misstatement in Enron’s financial reports is due to conflict of interests. As we know today, auditing firms are not to be providing consulting services to remain independent. However, back in the days prior to the fall of

More about The Enron Scandal Of Enron

Open Document