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Enron Case

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Alyssa Filkins

Module 11 – Enron

Professor White

07/16/2014

1) The Enron debacle created what one public official reported was a "crisis of confidence" on the part of the public in the accounting profession. List the parties who you believe were most responsible for that crisis. Briefly justify each of your choices.
Arthur Andersen & Co. – This company that started many years ago preached about honesty, integrity, and a strong work ethic. Through their motto that was widely portrayed and talked about, they instilled trust with their clients, auditors, regulators, and potential investors. When their significant role in Enron’s downfall and in turn, fraudulent practices, was brought to light, it was shocking that a company with such high ethical standards would fall short of anything less than what they preached since day one. By preaching such high standards and doing the opposite, the confidence in all companies of the like certainly decreased.

Of course, the chief officers/executives were responsible for the fraudulent financial reporting and therefore, confidence crisis. Kenneth Lay, Jeffrey Skilling, and Andrew Fastow intentionally participated in financial reporting tactics that violated GAAP and general ethical standards. This caused such a crisis because investors, clients, and the general people expected a lot of ethical success from Enron and Andersen because they appeared to be doing good, legitimate day to day business and spoke very highly of themselves and their practices. 2) List three types of consulting services that audit firms are now prohibited from providing to clients that are public companies. For each item, indicate the specific threats, if any, that the provision of the given service could pose for an audit firm's independence. (Hint: See SOX)

The Sarbanes-Oxley Act banned the provision of consulting services...

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