Enron Scandal and Arthur Andersen: A Case of Business Law

Running head: BUSINESS LAW
Business Law Assignment
Name of the Student
Name of the University
Author Note

1BUSINESS LAW
Introduction:
Enron scandal which happened early in the year 2001 altered the face of business
forever. Enron was one of the “high flying energy trading company”, but it came out as
something which is not more than any slowly unravelling billion dollar finance scheme.
Thereby the employees and investors of the company had to suffer a loss of billions of dollars
after it was exposed. (Shoaib et al 2012) The company was then forced to go into
Bankruptcy. This Enron scandal brought down Arthur Andersen too.
Body:
In Arthur Andersen LLP v. United States, 544 U.S. 696 (2005), case in the United
States the Supreme Court overturned the accounting firm Arthur Andersen's conviction
of obstruction of justice in the fraudulent activities along with collapse of Enron, because
the jury instructions provided failed to properly express the law which Arthur Andersen
violated. Eventually as this case became famous the firm had to cease its audit activities. By
the last part of Enron, Arthur Andersen, which is the accounting firm of Enron ordered its
employees to destroy all the documents relating to Enron. This was done soon after the
officials learned about the investigation by the Securities and Exchange Commission.
“Charge of obstructing an official proceeding” with regards to the “Securities and Exchange
Commission” was thereby filed against the Arthur Andersen LLP in US District Court.
Andersen then appealed to the US “Court of Appeals”. It then affirmed the district court's
decision.
Conflict of interest happened in Enron and Arthur Andersen by the way of that the
consulting fees were 27% of the auditors’ total fees. It was gained Enron. The written report
which was done was not according to Accounting Standards Board. This amounts to breach
of standard of care. Here damages occurred which forced Enron towards Bankruptcy. Arthur