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

in its Enron audits, the firm needed to 1) split its audit from its consulting practice; 2) ban the current
financial incentives tying auditors' compensation to selling consulting work; 3) refrain from
performing internal audit work on audit clients; and 4) adopt a waiting period before Andersen
partners could go to work for a client.
D. Andersen Destroyed Evidence of its Conflicts and Complicity
917. As alleged in 962-966 in the Fall of 01, as a federal investigation into Enron's
collapse ensued and the certainty of litigation regarding Andersen's role in Enron's accounting
loomed on the horizon, Andersen knew its own documents, if found, would deeply implicate the firm
in the accounting scandal. While Andersen has a professional duty to retain and preserve any and
all documents and information to support and defend the conclusions reached and work performed
during its audit and review services, this duty was directly at odds with 1) its overwhelming desire
to get rid of any damaging documents that would implicate Andersen, and; 2) avoiding at all costs
the revelation that it had violated a standing SEC consent decree by participating in yet another cover
up of accounting fraud at one of the firm's largest clients. In connection with a 98 SEC investigation
into a massive accounting scandal at Waste Management, the Commission found that Andersen's
internal documents revealed that Andersen not only knew of the accounting fraud at its client, but
was deeply involved in the secret cover up. As a result, the SEC slapped Andersen with the first
anti-fraud injunction in 20 years and the largest civil penalty ($7 million) in SEC history for an
accounting firm. In addition, the SEC sanctioned several high ranking Andersen partners for their
highly inappropriate conduct, and required Andersen to sign a consent decree forbidding the firm
from any future wrongdoing.
918. Because of these issues and other events, by the Fall of 01 Andersen had internally
come to the cold realization that an imminent investigation of Enron's financial accounting would
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