Enron and Arthur Anderson Scandal
The Enron Corporation developed into one of the seven largest corporations in the United States. Enron’s started out as a distributor of gas and became a buyer and seller of gas. Enron’s troubles started when they took on the additional responsibilities of being buyers and sellers of the natural gas.
In the Enron case, fraud could be determined in many ways. For example, the red flags that should have been detected by the government when Enron and other corporations sought- after the deregulation of the energy business should have been immediate. However, restrictions were dismissed by the government. Internal controls should have been put in place to monitor these agencies to make sure no fraud was being committed. Additional regulations should have been put in place to circumvent other problems. In reviewing this case
it can be said that many issues that should have been dealt with. For instance, Enron did not have the money to purchase natural gas. Then Enron produced SPE’s that caused problems because they were cooking the books to deceive investors. Other issues, if valid regulations had been in place by the government could have possibly prevented the SPE Fraud.
The AICPA made several new Statements on Auditing Standards in response to the Enron events. The three that appear to be most closely linked to the Enron and Andersen debacle are SAS 96, SAS 98, and SAS 99. SAS 96 became effective January of 2002 and dealt with the record retention policies of accounting firms. In SAS 96 the requirements of SAS 41, which was the first SAS to address record retention, were reaffirmed. Also several new regulations were added. SAS 96 contains a list of factors that auditors should consider when attempting to determine the nature and extent of documentation for a particular audit area and procedure. It also requires auditors to document all decisions or judgments that are of a significant degree (SAS...