Hard to Believe...

[Laocoön]

http://www.time.com/time/business/article/0,8599,193520,00.html

...but if it's true, Arthur Andersen should be -- and if there is any sense in the world, will be -- demolished brick by brick.

Unfortunate for the many very professional people who work there.

[Laocoön]

Well, my link doesn't work, so here is an excerpt:

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. As a result, FBI investigators, congressional probers and workers suing the company for lost retirement savings will be denied thousands of e-mails and other electronic and paper files that could have helped illuminate the actions and motivations of Enron executives involved in what now is the biggest bankruptcy in U.S. history.

Supervisors at Arthur Andersen repeatedly reminded their employees of the document-destruction memo in the weeks leading up to the first Security and Exchange Commission subpoenas that were issued on Nov. 8. And the firm declines to rule out the possibility that some destruction continued even after that date. Its workers had destroyed "a significant but undetermined number" of documents related to Enron, the accounting firm acknowledged in a terse public statement last Thursday. But it did not reveal that the destruction orders came in the Oct. 12 memo. Sources close to Arthur Andersen confirm the basic contents of the memo, but spokesman David Tabolt said it would be "inappropriate" to discuss it until the company completes its own review of the explosive issue.

[The Diabolical Biz Markie]

This (http://www.time.com/time/business/article/0,8599,193520,00.html) is free of charge....

:wink:

[roz]

A CFA I know well was doing equity analysis for a wall st firm 1 year ago. He looked at Enron and concluded strongly that the off-balance sheet stuff was way too dodgy for comfort, and recommended immediate divestment. Pretty smart in retrospect, pity he was over-ruled.

Now, he is not a quant, not an accountant, and only had access to public domain information. So you can't help wondering what the f*** Arthur Anderson were up to.There's a very bad smell here.

[Vermont's Finest]

Laocoon: how is it "unfortunate" for the "professionals" working at Andersen? Granted, there are no doubt some quality, ethical people at Andersen. But as someone who knows many CPA's, Andersen has always been borderline on ethics. The quality of their Audit workpapers and methodology has been questioned many times in the past.....

If the allegations in the Time article are true, then maybe these "professionals" should have taken a stand against breaking the law & destroying documents! What a novel thought!

And if they've been caught 3 times in recent years failing to adequately uphold the standards of the profession (Sunbeam, Waste Mgmt, Enron), then how many other times has Andersen been negligent, yet failed to get "caught"?

[Laocoön]

VF, your question doesn't make a lot of sense as written. Can you possibly think that it is not bad to be employed by a company that goes belly-up over professional lapses? Can you possibly think that every last employee at Andersen brought this bad situation upon himself by failing either to stop the sort of behavior that has blown up on the firm or to leave the firm? No, and no.

If you have a point that you wish me to address, please restate your question.

[Vermont's Finest]

Laocoon: have you ever actually spoken to an auditor? My wife is an auditor, and has worked on energy clients. (not Enron, thankfully) She has audited companies with off-balance sheet exposures similar to what Enron had.

Point being, her Audit team actually took steps to determine what these off-balance sheet items were. Unlike Andersen.

I'm sure there are many dedicated, talented, ethical people working for Andersen. I doubt many of them are partners in the firm (focus mainly on the ethics part of that statement), and let's face it, those people have the most to lose from this. And they set the tone of that organization.

So don't cry me a river for Andersen, especially their partners, senior managers, maybe even the managers. A lot of these people have probably faced similar ethical dilemmas in the past. Based on 3 instances in recent history (again, Sunbeam, Waste Mgmt, Enron) who knows how many other times they have failed to catch Audit discrepancies, but gotten "lucky" and nothing happened.

[Laocoön]

Vermont's Finest? I don't think so: Twit List.

[Vermont's Finest]

Highly constructive and instructive commentary. Do you have anything to add?

[Laocoön]

Now Andersen has sacked Enron's primary consultant (and a couple others, sort of), and proclaimed that this demonstrates their commitment to ethics. Hmmmm... When the biggest bankruptcy in history is preceded by professional lapses at Andersen, and there is a deliberate destruction of documents that becomes publicly known, then Andersen is ready to do the right thing. They might have more credibility if they'd cut the appropriate throats before everything was out in the open.

Some deeds impugn not only those directly involved, but also the very environment in which they operated. There are too many steps between being an honest auditor and winking at the nonsense Enron was up to for it to have happened without the indirect complicity of the leadership at Andersen. Andersen may think (hope?) that it is still a matter of isolating a few miscreants there and saving the firm, but really it is time for the accounting profession and the financial system to drop the blade on Anderson and save themselves.

[Oracle]

Good thinking, Lao. First you call VF a twit, then you basically end up in agreement.

[aNoNo]

On 2002-01-15 23:04, Laocoön wrote:
Now Andersen has sacked Enron's primary consultant (and a couple others, sort of), and proclaimed that this demonstrates their commitment to ethics. Hmmmm... When the biggest bankruptcy in history is preceded by professional lapses at Andersen, and there is a deliberate destruction of documents that becomes publicly known, then Andersen is ready to do the right thing. They might have more credibility if they'd cut the appropriate throats before everything was out in the open.

Some deeds impugn not only those directly involved, but also the very environment in which they operated. There are too many steps between being an honest auditor and winking at the nonsense Enron was up to for it to have happened without the indirect complicity of the leadership at Andersen. Andersen may think (hope?) that it is still a matter of isolating a few miscreants there and saving the firm, but really it is time for the accounting profession and the financial system to drop the blade on Anderson and save themselves.


I agree big time with L. I think the credibility of the U.S. financial markets is some what at risk depending on how the "system" responds to the debacle. If people lose confidence in public financial statements, potential investors are going to be less likely to invest in companies.

I bet there will be some interesting discussions among the Board audit committee members of companies for which Arthur Andersen is the appointed auditor.

At least when TP had an OOPSIE for CALPERS a few years back, it was an "honest" mistake without any apparent cover-up.

<font size=-1>[ This Message was edited by: aNoNo on 2002-01-16 08:14 ]</font>

[exactuary]

I may assign a probability less than 50% to the following, but at least we should consider it possible:

Suppose that the audit partner is a moron. Certainly a number of consulting actuaries are morons, or inattentive, or lazy or selfish. This guy could be a "people person" with "great" consulting skills and no real auditing talent or intuition.

Still, Andersen should have procedures in place to sniff out such situations. But, for $52 million, who wants to sniff?

So how bad is Andersen? Better or worse than its peers? If worse, how much worse?

[AAinsider]

On 2002-01-14 11:31, Vermont's Finest wrote:
Laocoon: how is it "unfortunate" for the "professionals" working at Andersen?

...

If the allegations in the Time article are true, then maybe these "professionals" should have taken a stand against breaking the law & destroying documents!
[/qoute]

Andersen employs 85,000 people with something like 1400 partners worldwide, yet you condemn them all based on the actions of a few. Do you think that the majority of these individuals destroy pertinent documents to avoid litigation? It was most likely a few key partners and their assistants. The assistants might not have even known they were doing something they shouldn't have.

[quote]
And if they've been caught 3 times in recent years failing to adequately uphold the standards of the profession (Sunbeam, Waste Mgmt, Enron), then how many other times has Andersen been negligent, yet failed to get "caught"?


This is a valid question, however, Deloitte and Touche recently concluded that Andersen's "system of accounting and auditing quality has been deemed to provide reasonable assurance of compliance with professional standards, following the most extensive peer review in the firm’s history. Deloitte & Touche’s report, which includes an unmodified opinion for the review year ended August 31, 2001, has been accepted by the Peer Review Committee of the American Institute of Certified Public Accountants’ (AICPA) SEC Practice and is available at the AICPA, http://www.aicpa.org/members/div/secps/index.htm. "

Maybe the question should be how does Andersen deal with individuals in private when improper actions are discovered? It is unlikely Andersen will issue a press release saying "We recently became aware that several partners on engagement XYZ were choosing illegal/unethical courses of action, so we dealt with them by doing A,B, and C. Even though it doesn't negatively affect the information we provided we wanted you to know so you could persecute and condemn us." In light of the recent litigation you may say something of this nature would help their public opinion. However, if nothing were going on and they made these actions public, rather than dealing with them privately, the public opinion would deteiorate (sp?) and Andersen could possibly lose business.

Maybe it isn't Andersen as a whole that should be condemned. Obviously the entire industry needs to be looked at and reviewed. It is no secret that accounting firms have called for stricter and more narrowly defined accounting rules. This is becuase many top executives feel it is necessary to stretch the current ambiguous rules to keep business. If they could fall back on more stringent requirements, their clients would be less liekly to feel another auditor would be better for them.

I do not defend the actions of the FEW individuals involved in these cases. But I certainly feel it is sad that educated individuals would condemn innocent people becuase they chose to work for the wrong company.

I feel as though I have been attacked, even though I have no relation to Enron, besides working in Houston.

<font size=-1>[ This Message was edited by: AAinsider on 2002-01-16 11:50 ]</font>

[Andy Lang]

Vermont's Finest:

[And if they've been caught 3 times in recent years failing to adequately uphold the standards of the profession (Sunbeam, Waste Mgmt, Enron), then how many other times has Andersen been negligent, yet failed to get "caught"?]

In addition, last night on C-Span a CPA guest mentioned that Anderson was also the auditor on perhaps the most famous of all the S&L collapses, Lincoln Savings and Loan--(Keating), AND there was also a major case involving Anderson in Arizona involving hindreds of millionns of dollars.

GO BERNIE and WELCOME ABOARD JAMES---better late than never.)! (Just thought I would throw that in<G>)

[Lee Mellon]

hindreds of millionns That's an awful lot of butts.

[Vermont's Finest]

AAinsider: some of my comments may have been inflammatory & irresponsible in retrospect. As I wrote in an earlier post, I'm sure there are many dedicated, talented, and ethical people working at Andersen. However, I stand by my statement that few of the partners probably fit the "ethical" part of that statement. This is NOT a slam solely on Andersen.....I feel that way about most accounting partners, at least in Big 5 firms. Few are deep thinkers, and a limited number are what I would call "ethically motivated".

And as for D&T's "peer review"...c'mon!! You seem like an intelligent individual, thus you must see the lunacy of having one Big 5 firm peer review another firm (who could very well have to turn around and exchange the favor someday) and then claim that it's an impartial look at the operations.

I agree wholeheartedly that this is a symptom of a larger issue: executives stretch the rules because there aren't more stringent rules in place. It's tough (as an Auditor) to tell a client to "take a hike" when you know another Big 5 firm will come in and take the business.....but it may be necessary from time to time. In my limited experience (admittedly), it seems that Andersen rarely does this. Maybe that's true of all Big 5 firms when faced with these issues.

Finally, I apologize sincerely for making you feel attacked. Looking back on my comments, it was definitely implied in my message. (if not explicitly stated) Thank you for calling me on this. No hard feelings hopefully. :smile:

[Guerilla poster]

Editorial in NY TIMES BY ARTHUR LEVINE FORMER SEC CHIEF hits the points i think

http://www.nytimes.com/2002/01/17/opinion/17LEVI.html

[Actuary321]

WASHINGTON (AP) - Enron Corp. fired the Arthur Andersen accounting firm Thursday in the aftermath of the auditor's massive destruction of documents, said an attorney for the bankrupt energy giant.

"We're very troubled about the destruction of the documents, and we're very concerned about the accounting advice we got," said Washington attorney Robert Bennett, who is representing Enron.
Now there's the pot calling the kettle black.

[Lee Mellon]

He's a lawyer fer cyin out loud. What do you expect him to say?
"We're crooks, but they're crooked and incompetent and we don't wish to go to jail with them. Really, we just want to put as much blame on everybody else that we can. Y'all bought our stock and bond issues. You made us do it (to you)."

[Actuary321]

I'm not exactly sure why, but WE divested all of our holdings, both stocks and bonds, in Enron last April.

[Lee Mellon]

See, now if you folks had ANY contact with AA you're going to be called on insider trading.

[Actuary321]

We are safe but I don't know about our investment advisors?