Arthur Andersen - Short Essay

Arthur Andersen 1. As Enron's accountants were supposed to objectively review the company's financial condition and report on that condition, honestly, so that investors and the public could fairly evaluate the risk of trusting Enron and investing in the company. Instead, Arthur Anderson helped Enron defraud investors and the public by helping the company keep material information private. Because Arthur Anderson was a respected and trusted accounting firm, believed to be expert in its work, its "stamp of approval" legitimized Enron and gave its financial reports and statement credibility that it may not otherwise have had. 2. Arthur Andersen bowed to the management by failing to have Enron establish and enforce internal control. Destroying Enron audit papers which covered deficiencies. This obstruction of justice was what led to formal charges and jail sentences. AA approved the structure of many Special Purpose Entities (SPE) that were used to generate false profits, hide losses, keep financing off Enron’s consolidated financial statements, and failed to meet the required outsider 3 percent equity at risk, and decision control criteria for non consolidation. In addition, various transactions between Enron and the SPEs were not in the interest of Enron. 3. The prime motivation behind the decisions of Arthur Andersen’s audit partners was revenue generations. They wanted to make money, plain and simple. The audit partners wanted to make sure that they made a profit, and wanted to keep the clients that made them the profit. Proof of this is AA use of SPEs to make false profits and also to hide the losses. This shows that they would do whatever it took to make sure they made money and to keep their clients happy. 4. Auditors should make decisions in the public interest rather than in the interest of management or current shareholders because they have taken a pledge to do so. Also because making decisions in the public interest is the ethical way