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Arthur Andersen in theEnron Case
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Contents
Introduction of Arthur Andersen
Arthur Andersen in Enron Case
Consequences of Enron Case
Lessons from Enron Case
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Introduction of Arthur Andersen
One of ¡°Big Five¡± Accounting Firms
Founded by Arthur Andersen, 1913
Supporter of Integrity of independent audits
¡èReputation for honesty, integrity, ethics
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Introduction of Arthur Andersen
As time passed, change in Philosophy
Increased focus on:
Consulting wing
Growth- capturing many big clients
Maximizing Profits
Guilty verdict of obstruction of justice
¡æ Collapse in June 2002
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Enron Case
Arthur Andersen was Enron¡¯s accounting firm
Enron¡¯s bankruptcy raised questions about its financial statements
U.S. Justice Department conducted criminal investigation
An¡¦(»ý·«)
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lost its credibility
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Lessons from Enron Case
Auditor¡¯s perspective
Management¡¯s perspective
Board of Director¡¯s perspective
Government and regulator¡¯s perspective
Public¡¯s perspective
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Auditor¡¯s Perspective
Separation of auditing and consulting
Maintain independence & integrity of auditing
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Management¡¯s Perspective
Reduction of excessive compensation given to executives (e.g. : Stock option)
Elimination of off-books entities
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Board of Directors¡¯ perspective
Outside directors should monitor management
Empowerment
of board of directors
Include audit expert to the board of directors
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Government and Regulator¡¯s Perspective
Prohibit ownership of both auditing and consulting services by one accounting firm
Prevent conflict of interests
Protection of whistle blowers
Prevent
management¡¯s fraud from inside
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Public¡¯s Perspective
Big corporations should not be completely trusted for