Arthur Andersen’s Troubles

Topics: Enron, Audit, Financial audit Pages: 2 (524 words) Published: October 4, 2014


Arthur Andersen’s Troubles
1. Arthur Andersen approves the structure of Special Purpose Entities. This SPE that was being used by Enron for off-balance sheet financing that misleading the public that Enron is doing well. These fraud generated by creating false profits, hide losses, keep financing off Enron’s consolidated financial statements. Instead of giving a proper advise and addressed these issuers to Enron, Arthur Anderson allowed Enron to continue to manipulate their numbers and mislead the stakeholders. As an advisor, Arthur Andersen doesn’t have the desire to confront Enron board in order not to upset management, and particularly Fastow, Skiling, and Lay.

2. Arthur Andersen decisions were faulty which they approve Special Purpose Entities that incorporate with Enron’s financial statements. Arthur Andersen was being incompetence, doing errors as to the significance of each of the audits finding. Arthur Andersen failed to recognize the Generally Accepted Accounting Principle (GAAP) that disallow recording of shares issued as an increase in shareholders’ equity. As an advisor, Arthur Andersen doesn’t have the desire to confront Enron board in order not to upset management, and particularly Fastow, Skiling, and Lay.

3. These companies only served their self-interest motives, their prime motives is personal benefits and greed. Lack-integrity and lack of ethical culture from top management cause a poor corporate ethics and loss of trust in the accounting profession. These corporate frauds shows that they would do whatever it look to make sure they made money for personal to satisfy their personal benefits and to keep their clients happy.

4. Audit firm should conduct their business in ethical way which is in the interest of public. There are no circumstances where auditors should make decisions in interest of management or current shareholders. Because of these corporate frauds, other than management, thousands of people were implicated....
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