Arthur Anderson Case- Question Responses

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1. Was there unethical conduct by Andersen/any of its employees? If so, what specifically did Andersen/its employees do wrong? What principles inform your analysis? There was implied unethical behavior indicated in the e-mails sent by Nancy Temple, an Andersen lawyer. She sent an e-mail to “remind” Andersen employees working at Enron of the “document retention policy,” which stated that non-essential case documents be shredded while on a client engagement. However, it later surfaced that from that point forward, Andersen employees on the account spent hours shredding documents, possibly pertinent to the trial. Furthermore, a separate e-mail included instructions from Nancy Temple to remove the name of legal counsel from the document, indicating that the lawyer knew that her advice could be supporting insidious activity. 2. Assuming you believe there was unethical conduct by Andersen/its employees, how did this happen? This happened because of the close relationship between the audit firm and their client, in this case Enron, contributed to biased judgments and interpretations of accounting practices and standards. Enron, an incredibly competitive firm whose managers were heavily incentivized to maximize profits (and hide losses), was a large source of revenue for Andersen over the years, and to cause conflict by disagreeing with their accounting practices could have caused Andersen to lose the account and revenue stream. Andersen employees took the approach that it is in the firm’s best interest to keep Enron happy. Additionally, once these practices were adopted, to “expose” the risk to management chain would be also expose the fact that the practice was wrong from the beginning; it is likely that many individuals were also just trying to protect their own jobs. 3. What could Andersen have done differently? Andersen could have done more to

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