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Case Teaching Note
Arthur Andersen: Shredding the Reputation and Viability
of any Once Venerable Accounting Firm
Four times before the high-flying, energy-trading big, Enron, unveiled a $618 million damage for the third quarter of 2001, a lawyer for Arthur Andersen, the accounting firm that audited Enron's books, wrote a memo to Andersen personnel directing those to do something remarkable.[i] Andersen had a policy of retaining the important thing documents at the rear of an review but reducing notes, breezes and memos that were created during the audit. The legal professional, Nancy Forehead, wrote within an e-mail to David Duncan, the Andersen partner in Houston whom oversaw the Enron bank account, "[i]t could be useful to consider reminding the [Enron] involvement team of your documentation and retention plan. ( It will be helpful to make sure that we have complied with the insurance plan. вЂќ[ii] Duncan followed Temple's advice, as well as the Andersen proposal team was ordered to destroy most audit material related to the Enron account except for the most basic work paperwork. As the destruction savoir was being happy, the United States Securities and Exchange Commission (SEC) initiated a probe of Enron's business activities. To be able to secure necessary accounting paperwork and info, the SECURITIES AND EXCHANGE COMMISSION'S issued subpoenas to Enron's auditor upon November 8, 2001.[iii]
In Drive of 2002, the United States Justice Department, sought an indictment against Andersen rather than particular individuals " because the firm had shredded massive volumes of Enron-related documents just as a govt investigation was kicking in gear. вЂќ[iv] According to former SEC chairman Arthur Levitt, Andersen's violation with the consent decree in an accounting scheme that inflated Waste Management's pretax income was " one of the main reasons for indicting the entire...