Question

what were the Audit opinions on Enron before the scandal?

Answer 1

After decades in which accountants managed to convince the public of their ability to bless the books of corporate America with virtually no regulatory oversight, there is growing skepticism about whether accountants can continue to police themselves.

In a way that no previous accounting scandal has -- and there have been plenty of late -- the collapse of Enron and the role of its auditor, Arthur Andersen & Company, have galvanized a discussion in the profession, among regulators and within Congress over the future of the industry. Investors, including thousands of Enron's own employees, poured billions of dollars into Enron as it reported strong profits, only to see their stock dwindle to nearly nothing amid doubts about the reliability of the company's financial statements.

Andersen is now the subject of a Justice Department investigation, numerous Congressional inquiries and lawsuits from shareholders over its stamp of approval on Enron's books. The firm's admission last week that it had destroyed documents involving Enron has only intensified speculation about whether Andersen acted improperly in some way.

''This is potentially a seminal breach of C.P.A. standards and ethics,'' said Representative Jim Leach, Republican of Iowa, a former chairman of the House Banking Committee, referring to certified public accountants. The result is likely to be a careful analysis of both the profession's standards and the means for enforcing those standards, he said.

In recent years, concerns have mounted about whether auditors are truly independent of their clients. Accounting firms have come to rely more on consulting work rather than on traditional audits for their revenues, raising questions about their ability to stand up to clients if improper bookkeeping is suspected.

In Enron's case, consulting work accounted for slightly more than half of the $52 million that Andersen received in fees in 2000. Even more important, though, was the potential income from consulting, according to John C. Coffee Jr., a law professor at Columbia. ''Enron was a potential market for $50 million or $100 million in consulting fees,'' he said.

In recent years, concerns have mounted about whether auditors are truly independent of their clients. Accounting firms have come to rely more on consulting work rather than on traditional audits for their revenues, raising questions about their ability to stand up to clients if improper bookkeeping is suspected.

In Enron's case, consulting work accounted for slightly more than half of the $52 million that Andersen received in fees in 2000. Even more important, though, was the potential income from consulting, according to John C. Coffee Jr., a law professor at Columbia. ''Enron was a potential market for $50 million or $100 million in consulting fees,'' he said.

Accountants have always been paid by their clients for their role in reviewing their books, and critics have also argued that auditors are increasingly reluctant to alienate a big client that may contribute a significant portion of its revenue. Andersen has acknowledged that Enron was one of its biggest and most desirable clients, something that would give pause to any auditor thinking about challenging the energy concern.

''There's no way that you could have a client which is that huge and important to you and not be tempted to turn your head away from problems,'' said Dan L. Goldwasser, a lawyer who often advises accountants. ''If the audit partner who's on the Enron account lost that account, they were history.''