The Enron Accounting Failure on Arthur Andersen's Reputation Assignment

Assignment Task

Aim

The aim of this study is to examine how the Enron accounting failure affected the reputation of Arthur Andersen. It will do this by examining how the bank has responded to critical audit dates. This analysis looks at whether investors have perceived a decline in the quality of the audit and looks at variations in abnormal returns between sectors. It also examines the relationship between auditor independence and non-audit fees.

Objective

To determine the extent to which Enron's audit failure affected Arthur Andersen's reputation as an audit firm.

To examine the stock market behavior of Arthur Andersen clients around a particular date when Andersen's accounting policies and independence were investigated.

To examine whether investors downplay perceived audits by Arthur Andersen in response to Enron's audit failures.

To assess whether there was a different market reaction to the estimates produced by Anderson’s Houston office compared to other locations after Anderson went into paper division.

To examine the relationship between the amounts of non-audit fees charged by Arthur Andersen and any possible questions about its independence as a result of Enron's audit failures.

This Accounting