Enron Case 1.3

Step 1 of 1

There were many parties who had responsibility in the Enron fraud:

• Enron Management: Played a significant role not only for orchestrating the fraud, but also in having an active role in trying to influence the auditors, and their independence.

• Arthur Andersen’s Senior Management: The accounting firm did not appear to have sufficient checks and balances on the work and potential conflicts of its outside offices. In addition, when several senior partners raised potential concerns about Enron, Andersen’s senior management had a responsibility to investigate these concerns (in essence audit the work of its own auditors), as well as to raise its concerns with Enron’s Board of Directors and its audit committee.

• Local Arthur Anderson Auditors: While the vast majority of the local office may have been delegated at times to the Enron account (from an audit and/or consulting role), local members of Andersen’s team had a duty to raise concerns not only with Enron’s audit committee, and board of directors, but also with senior management at Arthur Andersen (outside their local office). Their lack of effort to maintain independence creates concerns about the profession as a whole.

• Regulators: Regulators could have taken a larger role in limiting management’s ability to influence the auditing process.

• Investment Bankers/Bankers: Just as in the recent financial crisis, those who underwrote and/or traded Enron securities had a responsibility to their clients to conduct additional due diligence on any securities they underwrote particularly as Enron sought to do more exotic securities and partnerships.

• Academics/Accounting Industry Trade Groups: This group might have played a larger role in preparing auditors to deal with such situations and provide a way to help bring potential issues to the light. The trade groups might also have played a larger role in understanding how the special purpose entities could be used and abused in a...