Enron& arthur andersen when gaints fall


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A presentation about the effects of Enron scandal on Arthur Andersen and Auditing in general. presented during an accounting course by MBA students: Anjad Qusaibaty/Ola Diab/Kenan Al-Sayed/ Alisar Osman. At HIBA (higher institute of business administration)-Syria.

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  • Audits provide the public with confidence that issuers’ financial statements are reliable. Therefore Auditor reputation does matter.
  • Enron& arthur andersen when gaints fall

    1. 1. & Group 5
    2. 2. The Role Of Auditors in Enron Scandal. the consequences of Enron's bankruptcy on its external auditors (Arthur Anderson). the consequences of Enron's bankruptcy on the accounting profession in general.
    3. 3. To audit means to go through the process of examining and verifying a company's financial records and supporting documents.
    4. 4.  auditing provides reasonable assurance that a company’s financial statements are fairly presented in all materials respects in accordance with GAAP (General Accepted Accounting Principles).
    5. 5. Accountant record all the transactions took place throughout the year and record them in the books of accounts, while Auditor check the accuracy of the accounts and issue audit report.
    6. 6. Internal Auditors External Auditors: (their own auditing standards. ) Consultant auditors: (follow the firm's auditing standards)
    7. 7. NOT AN EASY JOB!!
    8. 8. Auditing in General Arthur Anderson & Enron
    9. 9. Watcher dogs Whistles blowers
    10. 10. It was founded in 1913 by a great Chicago accountant. Over time, it became one of the five top accounting companies in the world. Type : limited liability partnership.
    11. 11. Arthur Andersen as an External Auditing firm hired by Enron were Doing Good.. As we seen in the movie..
    12. 12. So.. WHAT WENT WRONG?!!
    13. 13. By a smart diabolic move, ENRON made ARTHUR ANDERSEN a key player in the game, by giving it the role of consultant along with their original task as external auditors.
    14. 14. The Auditor: Arthur Andersen The Consultant : Arthur Andersen CONFLICT OF INTRESTS!!
    15. 15.  30% Auditing& 70% consulting!!!  Arthur Andersen disregard the fraud and manipulation Enron did (Financial statement, Mark to market accounting, SPEs, and off-balance sheet practice), and signed their papers.
    17. 17.  Enron was Andersen’s second largest client.  Provided both external auditing and Consultations.  Get paid for consulting more than External Auditing (Example: $52 million in 2000, 16 EA & 36 C).  Disregarded Enron’s accounting misbehave& Misuse.  CFOs and controllers Hired in Enron were former Andersen executives!!!  Shredded all Enron’s Documents (1 tone of trash).  Andersen’s attorney altered documents related to its audit work for Enron and tried to bluff the jury in trial.
    18. 18.  Disgraced accountancy firm Arthur Andersen has been handed the maximum penalty allowed under US law for its role in the collapse of Enron.  Their CPA License has been canceled.  Joseph Bernardini & others went to Jail.  They were fined $500,000 & sentenced to five years' probation.  nearly all of Andersen's clients have fled away.  Cut down it’s workforce from 85,000 to less than 3,000.  Most of the firm assets have been sold.  Most of the partners have been taken off by other firms.  convicted of obstruction of justice after Andersen’s attorney altered documents related to its audit work for Enron.
    19. 19. AND WHAT ELSE?!!
    20. 20.  Creating the PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD under the SEC’s supervision: • board given the power to set accounting standards and to investigate whether companies and certified public accounting (CPA) firms are conforming to the standards. • board also had the power to fine certified public accountants (CPAs) and their firms for violations, suspend CPAs and their firms, and recommend criminal investigations by the Justice Department. • law also required CPA firms to separate their consulting & auditing services in order to avoid conflicts of interest like those in the Enron scandal.
    21. 21.  The American Institute of certified public accountants (AICPA), released new fraud guidelines for certified public accountants in an effort to help auditors detect misstatements in financial records due to fraud.
    22. 22. Anjad Qusaibaty Kenan Al-Sayed Alisar Osman Ola Diab