Enron And Arthur Andersen Case Study

1156 words, 5 pages

Intro Sample...

This case is about the company Enron which grew to become the seventh largest company in the United States. There were many problems in the Enron case. First, when the gas bank was created, they should have thought twice about this since many of the natural gas producers need cash which Enron did not have. This would lead to problems for Enron. Second, Enron created SPE’s which caused more problems because they were providing money and keeping the money off the books so that investors could not see what was actually going on. These SPE’s only complicated issues for Enron and its investors.

The internal controls that were ignored when LJM1 was created were one, LJM’s books were kept separate from Enron's. Arthur Andersen... View More »

Body Sample...

” (KuTenk 2000, 2009)
Enron’s financial reports should definitely serve as a red flag since the reports are unclear and frankly, confusing. As a fraud examiner, it is my duty to maintain internal controls for cash flow, inventory management, and accounts payable and receivable. Even though Enron’s stock has a history of strong growth, the fact that I can’t explain how the company is making money would send up red flags for me to investigate. “A fraud examiner is responsible for forming and maintaining internal controls for cash flow, inventory management, and accounts payable and receivable. A responsible segregation of duties is necessary to ensure security of incoming cash, outgoing payments, and the inventory and equipment assets.” (David Roberts, 2010)
Arthur Andersen could have performed audits and not caught the Enron fraud because it is possible that not all the documents were provided to him. It is also possible that he only reviewed the documents that were given to him, and no fraud was found in those documents. “"Fraud schemes are crafted to purposely exploit the accounting system and controls, and therefore it is more difficult for an auditor to find them. Since auditors are not all-knowing beings, the assurance that the financial statements are correct can only be "reasonable" assurance and not total assurance". (Tracy L. Coenen, 2006) I don’t think it is Andersen’s fault that he didn’t find fraud because he was not provided all the pertinent information and documents. It is also not an auditor’s job to catch fraud, but to make a complaint about possible ...

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