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Required: From an ethical perspective, discuss whether the actions of the Department of Justice were fair with regard to the employees of Arthur Andersen.

Required: From an ethical perspective, discuss whether the actions of the Department of Justice were fair with regard to the employees of Arthur Andersen.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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C22-6 Ethics, Enron, Arthur Andersen, and Accounting Changes In 2001, Enron Corporation filed financial statements in which it did not consolidate vari- ous special purpose entities, thereby keeping large amounts of debt off its balance sheet. The com- pany has since declared bankruptcy and admitted that it violated GAAP. Enron's auditor, Arthur Andersen LLP, issued an unqualified audit opinion stating that Enron had followed GAAP. Instead, Enron should have changed its account- ing principles to conform to GAAP, and Andersen should not have issued an unqualified opinion. The U.S. Department of Justice began an investigation of Enron and Arthur Andersen. Some employees of Arthur Andersen shredded certain documents related to the audit. As a result, the firm was found guilty of obstruction of jus- tice and therefore was no longer able to perform audits. Only a few of the Arthur Andersen part- ners and employees were involved in the audit and even fewer in the shredding. However, thousands of Arthur Andersen employees lost their jobs. Required: From an ethical perspective, discuss whether the actions of the Department of Justice were fair with regard to the employees of Arthur Andersen.
Transcribed Image Text:C22-6 Ethics, Enron, Arthur Andersen, and Accounting Changes In 2001, Enron Corporation filed financial statements in which it did not consolidate vari- ous special purpose entities, thereby keeping large amounts of debt off its balance sheet. The com- pany has since declared bankruptcy and admitted that it violated GAAP. Enron's auditor, Arthur Andersen LLP, issued an unqualified audit opinion stating that Enron had followed GAAP. Instead, Enron should have changed its account- ing principles to conform to GAAP, and Andersen should not have issued an unqualified opinion. The U.S. Department of Justice began an investigation of Enron and Arthur Andersen. Some employees of Arthur Andersen shredded certain documents related to the audit. As a result, the firm was found guilty of obstruction of jus- tice and therefore was no longer able to perform audits. Only a few of the Arthur Andersen part- ners and employees were involved in the audit and even fewer in the shredding. However, thousands of Arthur Andersen employees lost their jobs. Required: From an ethical perspective, discuss whether the actions of the Department of Justice were fair with regard to the employees of Arthur Andersen.
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