The Enron Corporation And Arthur Andersen Scandan

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“The fact that man knows right from wrong proves his intellectual superiority to other creatures; but the fact that he can do wrong proves his moral inferiority to any creatures that cannot.”
Mark Twain

It was theorized by Carl Jung that people connect ideas, feelings, experiences and information by way of association. Word association is the connection and production of other words in response to a given word. The most common association might be if the word “dog” is initially given there will be a subconscious association with the word “cat” by the majority of individuals. This would also stand true with the former Enron Corporation and Arthur Andersen LLP due to the word “scandal” notably being associated with their names. This was not
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Andersen’s participation in the Enron collapse could have very easily been anticipated due to having two major audit failures just within a few years of one another and right before Enron filed bankruptcy. In 1996, Waste Management’s audit reports from Andersen were materially false and misleading, resulting in an inflation of income by over $1 billion dollars between 1992 and 1996. In 1997 Sunbeam was found by the SEC to be using accounting tricks to create false sales and profits, Andersen signed off on these financial statements even after a partner flagged them. These two major audit failures should have put Andersen on high alert against another client failure, however the worst was yet to come. Internal documentation at Andersen showed that there were conflicts between the auditors and the audit committee of Enron. Also included in these memos are several e-mails expressing concerns: about accounting practices used by Enron. However, the leading partner on the audit, David B. Duncan, overturned these concerns. (Stinson) Also, there is proof that Duncan’s team wrote memos fraudulently, stating that the professional standards group approved of the accounting practices of Enron that hid debts and pumped up earnings (McNamee). One Enron accountant stated “We tried to aggressively us the literature [GAAP] to our advantage. All the rules create all these opportunities. We got to where we did because we exploited that

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