Unethical Practices

In: Business and Management

Submitted By ivette23
Words 447
Pages 2
1. What did Arthur Andersen contribute to the Enron disaster?
Arthur Andersen (AA) contributed in several ways to the disaster of Enron. AA collected fees for consulting advice and approved as auditors and consultants the structure of Special Purpose Entities (SPE). The SPE’s were used to hide Enron’s true financial situation. False profits were generated, losses were hid, and financing was kept off of Enron’s consolidated financial statements. The auditors did not enforce Enron to institute internal controls and failed to abide by Generally Accepted Accounting Principles (GAAP). AA did not warn Enron’s audit committee that there was a significant conflict of interest involving Andrew Fastow, Enron’s CFO and his helpers. Obstruction of justice was committed by shredding Enron’s audit papers leading to imprisonment charges. Transactions conducted between Enron’s, and the SPEs were not in the best interest of the shareholders, for example profits and cash flow were swayed and clearly inflated. This misled investors. The above are just to name a few contributions to Enron’s downfall.
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

The prime motivation behind the decisions of Arthur Andersen’s audit was profit and greed and was not in the best interest of the public. The leaders of AA did not recognize how infuriated the public, the politicians, and the SEC became by the series of AA audit failures.
“If they had recognized the precarious position they were in, the AA leadership might have corrected the flaw in the AA internal control that allowed Enron audit failures to happen (Brooks, P109, para 6)”.

There was a statement I found interesting, when Berardino would…...

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