Enron Corp. - University of California | Office of The President

915. Andersen also performed certain consulting services in such a way as to impair its
independence on its audits and reviews. For example, during the early-to-mid 90's, as part of its
relentless mission to sell more and more non-audit services to Enron, Andersen set its sights on
stealing Enron's important internal audit oversight function away from Enron's own internal auditors,
and selling the service itself to Enron on an outsourced, contract basis. Andersen and other big
accounting firms had successfully lobbied the AICPA to allow the practice on a limited basis, the
dual role of internal and external auditor was extremely controversial, and many outside the "big six
accounting firms" saw it as an outrageous conflict of interest. In Enron's case, Andersen's internal
audit consulting turned out to be just that. For example, by stripping Enron's internal audit function
of its power and assuming most of the responsibilities itself, Andersen effectively eliminated the
potential that another independent oversight body would discover and report the fraud. As a former
Enron employee involved in the transition to Andersen performing internal audit characterized it,
"Going forward, Skilling was left to run a casino for a business, with a day-care center for an
auditor."
916. Andersen's obsession with generating consulting fees from Enron caused a significant
conflict of interest while performing Enron's audits and reviews during the Class Period, and was
one of the factors that led to the impairment of the firm's integrity, objectivity and independence.
In fact, recent conclusions reached by the very committee Andersen established and funded to look
into its own policies as a result of the Enron debacle are in effect, an acknowledgment that such
conflicts do exist and did impair Andersen's independence on the Enron audits. On 3/11/02, less
than ten days after accepting the chairmanship of the blue-ribbon committee at Andersen's behest,
Chairman Paul Volcker quickly came to the conclusion that, among other things, if Andersen was
to resolve the kinds of conflicts of interest and impairment of independence that caused the problems
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