Responsibilities David Duncan owed to Arthur Andersen
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1. What responsibilities did David Duncan owe to Arthur Andersen? To Enron's management? To Enron's stockholders? To the accounting profession?
2. What are the ethical responsibilities of a corporate attorney, such as Nancy Temple, who works for "aggressive" client wishing to push the envelope of legality?
3. Under what conditions should an employee such as Sherron Watkins blow the whistle to outside authorities? To whom did she owe loyalty?
4. To whom does the board of director owe their primary responsibility? Can you think of any law or regulations that would help ensure that boards meet their primary responsibilities?
5. What responsibilities do government regulators owe business? To the market? To the general Public?
6. Are accounting and law professions or businesses? What is the difference?
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Solution Summary
1. What responsibilities did David Duncan owe to Arthur Andersen? To Enron's management? To Enron's stockholders? To the accounting profession?
2. What are the ethical responsibilities of a corporate attorney, such as Nancy Temple, who works for "aggressive" client wishing to push the envelope of legality?
3. Under what conditions should an employee such as Sherron Watkins blow the whistle to outside authorities? To whom did she owe loyalty?
4. To whom does the board of director owe their primary responsibility? Can you think of any law or regulations that would help ensure that boards meet their primary responsibilities?
5. What responsibilities do government regulators owe business? To the market? To the general Public?
6. Are accounting and law professions or businesses? What is the difference?
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1. Donald Duncan had responsibilities to all of the parties mentioned and he failed in the areas of due diligence, was guilty of acting negligently, and showed a complete lack of ethics throughout his involvement with Enron. As the head auditor, Duncan had the responsibility to maintain the highest professional accounting and auditing ethics, and to lead the auditing team in a responsible, unbiased manner. Due to several factors taking place at Enron, most of which surrounded Duncan and his firm collecting in excess of $100 million per year in Enron consulting fees, a healthy, skeptical auditor/client relationship was never maintained.
All auditors, including Duncan, are to maintain an unbiased attitude and they are also required to maintain a healthy level of skepticism - knowing fraud and misstatements could be present, but not judging without the supporting evidence that would arise from a proper audit, which is another element that was never actually provided by Duncan. Duncan was responsible for providing the best professional service that he was capable of, to his employer, Arthur Andersen. Duncan also had a responsibility to Enron's management, which was to perform a thorough, clean audit. Auditors don't audit companies for the benefit of the company; they audit companies for the benefit of the shareholders.
Duncan had a duty to shareholders to produce a clean audit, which would have showed the stockholders were losing money. When Enron collapsed, it actually was big enough to impact the market and the economy. This could have been mitigated earlier if Duncan had acted as he should have. Duncan's actions, including the ordering of Enron documents to be shredded, were and still remain a disgrace to the accounting profession and to business ethics.
2. There is nothing inherently wrong with aggressive tactics, including aggressive accounting practices, as long as the practices remain legal. The problem ...
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