When Foxes Guard the Hen House

BY DAN FRANK

I read “The Rise and Fall of Enron” ( JofA, Apr.02, page 41). As reported in the national media, Arthur Andersen’s apparent “cooking of the books” was created by the firm’s unique policy decision related to final accounting interpretations.

That decision—to have local offices override accounting policy decisions made by Andersen’s corporate office in Chicago—is the smoking gun of the accounting profession. From what I have read, no other national accounting firm has this policy; no local office can override significant accounting policies that require “clarification.”

The former Enron auditor, who was on the policy committee and then relieved of those duties after the company complained, clearly understood that pressure from the Houston office overwhelmed the corporate office.

The lack of an Arthur Andersen independent accounting interpretation group that could override client-pressured local offices apparently led to the debacles at Enron and Global Crossing, both Arthur Andersen clients. In my opinion, these represent cases of “buying an opinion”—something that was taught as being unconscionable when I attended college.

When foxes guard the hen house, chickens get eaten. Please give more accurate, meaningful information in the JofA than what the rest of the media provide.

Dan Frank, CPA
Seal Beach, California

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