Enron Arthur Andersen. Corporate Governance. Arthur Andersen Enron

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1 Arthur Andersen Corporate Governance Arthur Andersen 1

2 Arthur Andersen Sarbanes-Oxley Act 2

3 3

4 4

5 5

6 Andersen (Powers, 2002) Andersen Andrew S. * Source: Original Documents ( Financial Statements for 5 years and Powers Report), (Department of accounting, college of business administration, University of Illinois at Chicago), April 4,

7 Fastow (Powers, 2002) Fastow Andersen Ben F. Glisan Micheal J. Kopper (Powers, 2002) (LJM1 & LJM2) Fastow Fastow 7

8 (Chew Chew Co. Kopper Co., LJM1, and LJM2) Fastow Fastow LJM2 LJM1 * Source: Original Documents ( Financial Statements for 5 years and Powers Report), (Department of accounting, college of business administration, University of Illinois at Chicago), April 4,

9 Fastow Kopper Fastow 9

10 Chew Co. LJM2 LJM1 Andersen Special Purpose Entity Chew Co. * Source: Original Documents ( Financial Statements for 5 years and Powers Report), (Department of accounting, college of business administration, University of Illinois at Chicago), April 4,

11 Kopper Kopper (Joint Venture) California Public Employee Retirement System Kopper (Chew Co.) Fastow Chew Co. 11

12 Non- Chew Co. Kopper Andersen Consolidation Rules Andersen Andersen Chew Co. Kopper Chew Co. Chew Co. Kopper 12

13 Chew Co. Kopper Chew Co. Kopper Fastow Kopper Fastow Baarclays Cheow Co. LJM2 LJM1 Kopper LJM2 LJM1 Little River Equity Loan Cheow Cheow Co. Co. Cheow Co. 13

14 Fastow Fastow Fastow Andersen 14

15 LJM1 - LJM1 - - Rhythms Rhythms LJM1 Rhythms Fastow Rhythms 15 Rhythms Fastow LJM1

16 Rhytms Rhythms Andersen Corporate Governance (Financial Times, 1999) NYSE (Sweeney, 2002) 16

17 (SAS no. 99) Corporate Governance

18 - - 18

19 Corporate Governance (Van, 2003) 19

20 Lehman Brothers Inc. Thomas A. Russo WorldCom Samuel A. Dipiazza Jr. PricewaterhouseCoppers Conference Board Corporate Governance 21

21 Lead Independent Director Presiding Director Intel Corp. Andrew S. Grove Three-tire Director Evaluation Process 21

22 Risk- Prone Situations 22

23 Maureen Nevin Duffy Corporate Governance and Client (Duffy, 2004) Journal of Accountancy Investing 23

24 Joyce A. W. Max Linda M. Harvet Coustan Sarbanes-Oxley: What it Means to Oxley Journal of Accountancy Marketplace 24

25 Journal of M. G. Tina D. Sarbanes-Oxley Act Accountancy William Hillison Phillip Z. Fennema A Changing Corporate Culture Oxley 25

26 Oxley

27 - - Oxley 27

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30 Andersen Andersen Andersen Andersen Fastow Fastow Andersen Fastow 31

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33 - Alexander, Delroy, December 8, 2001, Auditors under fire for failing to flag problems (big 5 to institute together standards), Chicago Tribune, - At, The environment was ripe for abuse, February 25, 2002, by the McGraw-Hill Companies Inc - Audit and corporate governance failures at, Class 4 on April 4, 2002, Department of accounting, college of business administration, university of Illinois at Chicago website. - Bassett, Richard, and Storrie, 2002, Accounting at Energy Firms after, is the "Cure" Worse than the "Disease"?, Cato Project, on Corporate Governance, Audit, and Tax Reform, Cato Institute, Journal of Policy Analysis, Washington, 33

34 - Belkaoui, Ahmed, 2003, Politically-Connected Firms: Are they Connected to Earnings Opacity?, University of Illinois at Chicago website. - Bowen, Robert, and others, 2003, Accounting Discretion, Corporate Governance and Firm Performance, School of Business, University of Washington website. - Brown, Ken, and Weil, Jonathan, March 12, 2002, How Andersen s embrace of consulting changed the culture of the company, The Wall Street Journal, - Countryman, Andrew, March 17, 2002, "Roll-Ups : the pitfalls of conflicts, Chicago Tribune, - Duffy, Maureen, January 2004, Corporate Governance and Client Investing, Journal of Accountancy, - Eichenwald, Kurt, February 3,2002, panel finds inflated profits and few controls, The New York Times, - Eisenberg, Theodore, and Macey, 2003, Was Arthur Andersen Different? An Empirical Examination of Major Firms Audits of Large Clients, Center of Law, Economics and Public Policy, Yale Law School, Research Paper No. 287, Social Science Research Network, - Emshwille, John, November 5, 2001, Money & Investing transaction with entity run by executive raises questions, The Wall Street Journal, - Gunz, Sally, and Salterio, 2003, What if Andersen had Shredded in Toronto or Calgary? The Potential for Criminal Liability for Canadian Public Accounting Firms, School of Accountancy, University of Waterloo, Canada, - How the Sarbanes-Oxley Act of 2002 Impact Accounting Profession, AICPA, - Joyce, and others, February 2004, Sarbanes-Oxley: What it Means to Marketplace, Journal of Accountancy, 34

35 - Lavelle, Louis,February 18, 2002, Unleashing the watchdogs, by the McGraw-Hill Companies Inc, - Lisman, Steve, and others, February 6, 2002, Accounting debacles spark calls for change: here s the rundown, The Wall Street Journal, - Powers, William, Original Documents ( Financial Statements for 5 years and Powers Report), April 4, 2002, Department of accounting, college of business administration, university of Illinois at Chicago website. - Siddiqui, Javed, 2003, The Issue of Extended Non-Audit Service Fee Disclosure and Perceived Audit Independence: A study on UK Fund Managers, Facility of Business Studies, University of Dhaka, Bangladesh, - Simpson, Cam, February 19, 2002, Questions linger on Andersen; Shredding issues: What happened, who knew what?, Chicago Tribune, - Sweeney, Pul & Vallario, November 2002, NYSE Sets Audit Committees on New Road, Journal of Accountancy, - Tina, and others, March 2004, A Changing Corporate Culture, Journal of Accountancy, - Van, Arnum, and Patricia, Feb 3, 2003, Chemical Markets Reporter, - Weil, Jonathan, December 14, 2001, Arthur Andersen s double duty work raises questions about its independence, The Wall Street Journal, - White, Bin, February 26, 2002, plot takes twist: Critics rate the rating agencies after companies collapse, Chicago Tribune, - Wilke, John, and others, March 15, 2002, Indictment by justice department puts Arthur Andersen s fate on line, The Wall Street Journal, 35

36 The Understanding and Application of Corporate Governance in Every Day Use in the Listed Companies. T. Al-Qashi & H. Al-Khateeb ABSTRACT This Study Aims at identifying reasons stands behind the collapse of one of the most largest power companies ( Company), and which leaded to the collapse of the largest audit company (Arthur Andersen) due to its involvement in the financial manipulation at, and to identify the views of the USA companies toward the applicability of new changes done at corporate governance in every day use. The study concludes that: Both collapse of, and Arthur Andersen are due to professional ethics, Arthur Andersen did double job to, and which was a clear violation to the rules, The financial market authorities was responsible to those collapses due to shortage of control, Most of the companies and auditors face difficulties in applying new rules of corporate governance, and main problem arise in ethics not in the rules controlling corporate governance. 36