Adding to the Enron fiasco, according to authors Johnstone, Gramling, and Rittenberg, internal documentation at Andersen unveiled conflicts between their auditors and the audit committee of Enron concerning the accounting and disclosure practices at Enron. Andersen executives, however, wittingly did not act on this information. In fact, the authors state that David Duncan, the managing partner on Enron’s audit, “actively worked to ensure that Enron’s fraudulent financial reporting went uncovered,” for he was enthused by the colossal audit and nonauditing (such as tax and consulting) fees Andersen was grossing on the Enron engagement. Furthermore, in the article “Arthur Andersen Is Convicted On Obstruction-of-Justice Count,” Wall Street Journal writers Jonathan Weil and Alexei Barrionuevo state that, as a means of cloaking this incriminating evidence, while investigations into Enron were escalating, Andersen personnel began obliterating documentation relating to the Enron engagement. The writers attest to Andersen’ downfall as a result of obstruction-of-justice charges which barred Andersen from auditing the financial statements of companies registered with the Securities and Exchange Commission (SEC). Thus, one response to the query of how it was feasible for such frauds to transpire without being divulged is: Arthur Andersen LLP’s auditors were not independent, did not exercise professional skepticism, and did not conduct a quality audit—hence, failing to unearth the frauds
Adding to the Enron fiasco, according to authors Johnstone, Gramling, and Rittenberg, internal documentation at Andersen unveiled conflicts between their auditors and the audit committee of Enron concerning the accounting and disclosure practices at Enron. Andersen executives, however, wittingly did not act on this information. In fact, the authors state that David Duncan, the managing partner on Enron’s audit, “actively worked to ensure that Enron’s fraudulent financial reporting went uncovered,” for he was enthused by the colossal audit and nonauditing (such as tax and consulting) fees Andersen was grossing on the Enron engagement. Furthermore, in the article “Arthur Andersen Is Convicted On Obstruction-of-Justice Count,” Wall Street Journal writers Jonathan Weil and Alexei Barrionuevo state that, as a means of cloaking this incriminating evidence, while investigations into Enron were escalating, Andersen personnel began obliterating documentation relating to the Enron engagement. The writers attest to Andersen’ downfall as a result of obstruction-of-justice charges which barred Andersen from auditing the financial statements of companies registered with the Securities and Exchange Commission (SEC). Thus, one response to the query of how it was feasible for such frauds to transpire without being divulged is: Arthur Andersen LLP’s auditors were not independent, did not exercise professional skepticism, and did not conduct a quality audit—hence, failing to unearth the frauds