How Did Arthur Andersen Fail To Lie With Enron

Before Securities Act of 1933 was enacted, investors followed their instincts blindly. There was no accurate information regarding the company’s financial statements. Any kind of information fluctuates the market greatly. The market crashed in 1929 and followed with the great depression was the result of the fluctuation. The enactment of the Security Act requires all public companies to disclose any information that will change a reasonable investor’s decision. This is when auditing started to play a big role in the securities market. It is a third party that ensures the financial statements disclosed everything material for investor’s interest. A financial report that had been signed by a CPA firm was the best assurance of the financial report. However, people neglected the auditor’s …show more content…
This memo will discuss why Arthur Andersen was found with accounting scandal strongly tied with Enron and how Arthur Andersen failed to comply with the idea of independence to separate with the client as different parties in work, interest, and human resources.

Enron worked with Arthur Andersen closely in many different types of accounting services including internal auditing, external auditing, and consulting. With all the time being spent in Enron, Arthur Andersen was not able to differentiate the purpose of their work. Enron …show more content…
Arthur Andersen did not appear as an independent third party from their clients, and the accounting firm was also bearing a financial conflict. Being the fifth biggest certified public accounting firm in the United States, Arthur Andersen was helping companies creating fraudulent financial statements. The scandal decreases the public’s faith in security exchange once again. Congress enacting Sarbanes-Oxley with new regulations specifically for public company and registered public accounting firm to retain the public’s