What Arthur Andersen did wrong?
On June 15, 2002, Andersen was convicted of obstruction of justice for shredding documents related to its audit of Enron, resulting in the Enron scandal. Although the Supreme Court reversed the firm’s conviction, the impact of the scandal combined with the findings of criminal complicity ultimately destroyed the firm.
What did Anderson do wrong with Enron?
Many executives at Enron were indicted for a variety of charges and some were later sentenced to prison, including Lay and Skilling. Arthur Andersen was found guilty of illegally destroying documents relevant to the SEC investigation, which voided its license to audit public companies and effectively closed the firm.
What do you think caused the downfall of Arthur Andersen?
Enron Corporation is an American Energy Company based in Houston, Texas whereas Arthur Andersen was then one of the five largest audit and accountancy partnerships in the world, based in Chicago. The scandal happened as a result of accounting and auditing irregularities leading to a loss of $74 billion.
Why Arthur Andersen fail to flag Enron?
The material and pervasive misstatements throughout the financial report indicates that Arthur Andersen inadequately performed their substantive tests, as Enron’s equity and profit were both overstated. Enron was inherently unstable and had lacked effective internal controls that were both undetected by the auditor.
Why was Arthur Andersen conviction overturned?
Opinion of the Court In the court’s view, the instructions allowed the jury to convict Andersen without proving that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents.
Did Enron sue Arthur Andersen?
In February 2002, UC was named lead plaintiff in the Enron shareholders’ class action suit previously filed against top executives of Enron Corp. and its accounting firm, Arthur Andersen LLP. The university filed a consolidated complaint on April 8, 2002, adding nine banks and two law firms as defendants in the case.
What crime did the Justice Department charge Arthur Andersen with originally?
Arthur Andersen was Enron’s accountant prior to its 2001 collapse. In June 2002, a federal jury in Houston convicted the accounting firm of obstruction of justice for destroying Enron-related documents after being notified of a federal investigation into accounting irregularities and fraud inside the energy company.
Where and why did it go wrong in Enron?
Enron’s downfall is the predictable mixture of human greed, poorly structured incentives, and lack of sanity checks when everyone has their fingers in the pie. In smaller ways, we too are subject to the same pulls as Enron managers and employees.
Who was most at fault for Enron?
In addition to Fastow, a major player in the Enron scandal was Enron’s accounting firm, Arthur Andersen LLP, and partner David B. Duncan, who oversaw Enron’s accounts. As one of the five largest accounting firms in the United States at the time, Andersen had a reputation for high standards and quality risk management.
Who went to jail Enron?
Richard Causey, the former chief accounting officer who was slated to go on trial alongside Skilling and Lay but agreed to plead guilty just weeks before the trial began, served nearly five years in prison and was released in 2011.