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

. Fails to correct an entity's financial statements that are
materially false and misleading when the member has
the authority to record an entry; or
c. Signs, or permits or directs another to sign, a
document containing materially false and misleading
information.
Additionally, AU §220 – Independence, further states that:
.01 The second general standard is:
In all matters relating to the assignment, an independence in mental attitude is to be
maintained by the auditor or auditors.
.02 This standard requires that the auditor be independent; aside from
being in public practice (as distinct from being in private practice), he must be
without bias with respect to the client since otherwise he would lack that impartiality
necessary for the dependability of his findings, however excellent his technical
proficiency may be. However, independence does not imply the attitude of a
prosecutor but rather a judicial impartiality that recognizes an obligation for fairness
not only to management and owners of a business but also to creditors and those who
may otherwise rely (in part, at least) upon the independent auditor's report, as in the
case of prospective owners or creditors.
969. One of Andersen's responsibilities as Enron's independent auditor, was to obtain
"[s]ufficient competent evidential matter ... to afford a reasonable basis for an opinion regarding the
financial statements under audit" as to "the fairness with which they present, in all material respects,
financial position, results of operations, and its cash flows in conformity with generally accepted
accounting principles." AU §§150, 110. In violation of GAAS, and contrary to the representations
in its report on Enron's financial statements, Andersen did not obtain sufficient, competent,
evidential matter to support Enron's assertions regarding its income, assets, debt and shareholders'
equity for 97, 98, 99 and 00. Moreover, Andersen deliberately ignored information indicating that
Enron's financial statements did not "present fairly" the Company's financial position.
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