1. ENRON& ARTHUR ANDERSEN:WHEN GAINTS FALL!!
&
Group 5

2. General Agenda:
The Role Of Auditors in Enron Scandal.
the consequences of Enron's bankruptcy on its external auditors (Arthur Anderson).
the consequences of Enron's bankruptcy on the accounting profession in general.

3. WHAT IS AUDITING?
To audit means to go through the process of examining and verifying a company's financial records and supporting documents.

4. THE IMPORTANCE OF AUDITING
auditing provides reasonable assurance that a companys financial statements are fairly presented in all materials respects in accordance with GAAP (General Accepted Accounting Principles).

5. DIFFERENCE BETWEEN AUDITOR AND ACCOUNTANT
Accountant record all the transactions took place throughout the year and record them in the booksof accounts,
whileAuditor check the accuracy of the accounts and issue audit report.

6. TYPES OF AUDITORS
Internal Auditors
External Auditors: (their own auditing standards. )
Consultant auditors:(follow the firm's auditing standards)

7. NOT AN EASY JOB!!

8. Auditing in General
Moving from General to Specific
Arthur Anderson& Enron

9. ?!
Watcher dogs
Whistles blowers

10. BRIEF HISTORY OF ARTHUR ANDERSEN
It was founded in 1913 by a great Chicago accountant.
Over time, it became one of the five top accounting companies in the world.
Type : limited liability partnership.

11. At First:
Arthur Andersen as an External Auditing firm hired by Enron were Doing Good..
As we seen in the movie..

12. So..
WHAT
WENT
WRONG?!!

13. By a smart diabolic move, ENRON made ARTHUR ANDERSEN a key player in the game, by giving it the role of consultant along with their original task as external auditors.

14. CONFLICT OF INTRESTS!!
The Auditor:
Arthur Andersen
The Consultant :
Arthur Andersen

15. Arthur Andersen disregard the fraud and manipulation Enron did (Financial statement, Mark to market accounting, SPEs, and off-balance sheet practice), and signed their papers.
30% Auditing& 70% consulting!!!

16. BLIND FOLDED BY THEIR OWN WILL!!!
$$$

17. SUMMERY OF ARTHUR ANDERSEN ROLE
Enron was Andersens second largest client.
Provided both external auditing and Consultations.
Get paid for consulting more than External Auditing (Example: $52 million in 2000, 16 EA & 36 C).
Disregarded Enrons accounting misbehave& Misuse.
CFOs and controllers Hired in Enron were former Andersen executives!!!
Shredded all Enrons Documents (1 tone of trash).
Andersens attorney altered documents related to its audit work for Enron and tried to bluff the jury in trial.

18. CONSEQUENCES OF ENRON'S BANKRUPTCY ON ARTHUR ANDERSEN
Disgraced accountancy firm Arthur Andersen has been handed the maximum penalty allowed under US law for its role in the collapse of Enron.
Their CPA License has been canceled.
Joseph Bernardini & others went to Jail.
They were fined $500,000 & sentenced to five years' probation.
nearly all of Andersen's clients have fled away.
Cut down its workforce from 85,000 to less than 3,000.
Most of the firm assets have been sold.
Most of the partners have been taken off by other firms.
convicted of obstruction of justice after Andersens attorney altered documents related to its audit work for Enron.

19. CONSEQUENCES OF ENRON'S BANKRUPTCY ON ARTHUR ANDERSEN
AND WHAT ELSE?!!

20. Integrity lost!!!

21. CONSEQUENCES OF ENRON'S BANKRUPTCY ON THE ACCOUNTING PROFESSION IN GENERAL.
Creating the PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD under the SECs supervision:
board given the power to set accounting standards and to investigate whether companies and certified public accounting (CPA) firms are conforming to the standards.
board also had the power to fine certified public accountants (CPAs) and their firms for violations, suspend CPAs and their firms, and recommend criminal investigations by the Justice Department.
law also required CPA firms to separate their consulting & auditing services in order to avoid conflicts of interest like those in the Enron scandal.

22. CONSEQUENCES OF ENRON'S BANKRUPTCY ON THE ACCOUNTING PROFESSION IN GENERAL.
The American Institute of certified public accountants (AICPA), released new fraud guidelines for certified public accountants in an effort to help auditors detect misstatements in financial records due to fraud.

23. THANK YOU!!
Anjad Qusaibaty
Kenan Al-Sayed
Alisar Osman
Ola Diab