Read the Arthur Andersen’s Troubles Ethics Case on pp. 107–113 (Ch. 2) of the text.
Answer questions 1, 3, and 4 on p. 113 in 200 to 300 words. When responding to question 3, focus solely on the Enron case.
Questions 1. What did Arthur Andersen contribute to the Enron disaster?
I found an article in Time Magazine that discusses the fact that Andersen employees followed instructions from Enron executives to destroy documents. The Wikipedia article that I found lists the fact that Enron’s “nontransparent” financial statements “did not clearly depict its operations and finances with shareholders and analysts”. Wikipedia also mentions complex business models and unethical practices, including a modified balance sheet so that it portrayed a more favorable depiction of its performance.
3. What was the prime motivation behind the decisions of Arthur Andersen’s audit partners on the Enron, WorldCom, Waste Management, and Sunbeam audits: the public interest or something else? Cite examples that reveal this motivation.
It sure seems to me that at least in the Enron case, if Andersen’s employees destroyed documents as discussed, they were certainly not acting in the interest of the public. Actions like that could only be meant to help the company interest in attempting to avoid prosecution. Much less the possibility that financial documents were potentially modified to hide the real transaction histories.
4. Why should an auditor make decisions in the public interest rather than in the interest of management or current shareholders?
It is the job of an auditor to make sure that the true practices of any company is available to the public. Unethical practices like those that were involved in the Enron scandal are certainly prosecutable, and wrong. I myself am going into the accounting field in hopes of being the ethical person that is expected. If ethics are ignored, then there is something wrong, and well, that is just not okay. http://community.seattletimes.nwsource.com/archive/?date=20020707&slug=enron07 http://en.wikipedia.org/wiki/Enron_scandal http://www.time.com/time/magazine/article/0,9171,1001636,00.html
