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I've been doing a little reading about Andersen's audit failure in the Enron case and it's just amazing. In August 2000 Enron had a market capitalization of $60,000,000,000 (yep, that's 60 billion dollars). Sixteen months later 99% of that is gone. Enron's stock dropped from a high of $90.56 to $0.67 as I write this. Time published Enron: Who's Accountable? which discusses the audit failures of Arthur Andersen. I think they're just called Andersen these days. At the request of their lawyers, they had auditors shredding documenets related to the audit. They may have even continued shredding documents after the subpeona arrived. That could lead to some jail time.
Just four days before Enron disclosed a stunning $618 million loss for the third quarter -- its first public disclosure of its financial woes -- workers who audited the company's books for Arthur Andersen, the big accounting firm, received an extraordinary instruction from one of the company's lawyers. Congressional investigators tell Time that the Oct. 12 memo directed workers to destroy all audit material, except for the most basic "work papers." And that's what they did, over a period of several weeks.
Andersen is going to be sued for up to $20 billion by creditors and up to $60 billion by investors. If even just a few of those suits get though Andersen is done. As in chapter 11 bankruptcy done. There are a couple of interesting (but more technical articles) at AccountingMalpractice.com and Newsweek also published Lights Out: Enron's Failed Power Play.
posted on Wednesday, January 16, 2002 12:09 PM Print
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