The main issue of this case is basically Enron Corporation poor business decisions and lack of internal control that led to the bankruptcy of this company. Was Arthur Anderson & Co deprived internal audit system, audit reports and financial advisement what that led to the collapse of this company? Other issues further explains that Enron had also abused the market-to- market accounting method for its long term contracts involving in various energy commodities, primarily natural gas and electricity. The intense use of special purpose entities (SPEs) by Enron allowed them to avoid debts wish further explained their financial inaccuracy.
In fact SPEs provided large companies with a mechanism to raise needed financing for various purposes without being required to report debt in their balance sheets. Enron had created hundreds of these SPEs. A main factor that motivated Enron executive to window dress their company’s financial statement was the need for this company to sustain stock prices at a high level. The bonds were created but as a loan. This was used for capital investments and just to borrow money. This was hidden as it treated cash as revenues. Since they didn’t have to consolidate as it was off the book and balance sheets. This became an abuse to the SPEs rules.
Arthur E. Anderson relied on a simple four word motto to serve as a guideline principle in making important personal and professional decisions “Think straight, talk straight”, so how can a company with such great ethical foundation had gone so far in erroneous audits. Public reports that Andersen earned approximately $52 million in fees from Enron only $25 million directly linked to 2000 audits. This makes it obvious that Anderson company helped Enron cook the books.