On 14 March 2002, the Grand Jury of the United States Southern District Court of Texas indicted Andersen for obstructing the course of justice in relation to its shredding of thousands of Enron-related documents while the energy company was under investigation by the SEC. Some of the highlights from the eight-page indictment include:
“The approximately $1.2bn reduction in (Enron’s) shareholder equity disclosed to analysts on 16 October 2001 was necessitated by Andersen and Enron having previously improperly categorised hundreds of millions of dollars as an increase, rather than a decrease, to Enron shareholder equity.” So that’s what the brackets are for.
“The shredder at the Andersen office at the Enron building was used virtually constantly and, to handle the overload, dozens of large trunks filled with Enron documents were sent to Andersen’s main Houston office to be shredded. A systematic effort was also undertaken and carried out to purge the computer hard-drives and email system of Enron-related files … in London, a coordinated effort by Andersen partners and others, similar to the initiative undertaken in Houston, was put into place to destroy Enron-related documents within days of notice of the SEC inquiry.”
The complete indictment is available at http://news.findlaw.com/hdocs/docs/enron/usandersen030702ind.html
In response to Financial Director’s survey published last month, in which 57% of readers said companies should be compelled to rotate their audit firm, Peter Wyman, deputy president of the ICAEW says: “I find it extraordinary that any FD should wish to be told by government when his company must change auditors. Surely good corporate governance requires the audit committee to review its satisfaction with the auditors annually, and to recommend a change in firm if at any time they believe this would be in the interests of the company and its shareholders … there is a real risk of a system of mandatory rotation producing less rather than more robust audits.”