The Arthur Andersen/Enron case

The Arthur Andersen/Enron case came to light when Enron suffered a collapse in the third quarter of 2001 that resulted in the largest Bankruptcy to that point in US history and numerous lawsuits alleging violations of federal Securities laws.

Thousands of Enron employees lost 401(k) retirement plans that held company stock.

The controversy extended to Arthur Andersen, which was accused of overlooking significant sums of money that had not been represented on Enron's books.

Arthur Andersen was also accused of destroying thousands of Enron documents that included not only physical documents but also computer files and E-Mail files.

After investigation by the US Justice Department, the firm was indicted on obstruction of justice charges in March 2002. After a six-week trial, Arthur Andersen was found guilty on June 16, 2002. The company was placed on probation for five years and was required to pay a $500,000 fine.

Question1:

Explain in 10 lines at least, what would be the responsibilities and objectives of Arthur Anderson in the case of Enron scandal?

Question 2

Imagine yourself you were a member of Enrons management and being responsible about the internal controls, governance structure, control environment, risks, resourcesetc.

Give me your fundamental steps of how Enron Scandal could have been avoided or have been saved from this collapse?

Question 3

A professional judgment is part of professional skepticism.

Using the elements of the judgement process you need to:

1- Identify and define the issue.

2- Gather the facts and information and identify the relevant literature.

3- Perform the analysis and identify potential alternatives.

4- Make the decision.

5- Review and complete the documentation and rationale for the conclusion.

Based on the above, give a short description for each element regarding Arthur Anderson/Enron case. (N.B: you can do your own internet search if you need more information to talk about any of the elements that require more explanations in this case)