applied2 - Conspiracy of Fools Part II Raptors Page...

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Conspiracy of Fools Part II “Raptors” Page Fraudulent Activities, Groups Errors, and Agency Conflicts
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CHAPTER 6 138 Agency Conflict: Andersen served as both auditor and consultant to Enron, with many senior accountants developing close friendships with Enron managers. Veterans of Andersen also jumped to Enron as internal auditors, which facilitated a growing relationship (familiarity) between the two firms. Furthermore, incentives were not aligned with the best interest of the shareholders since Enron paid Andersen and could change auditors at any time. 140 Group Error: Carl Bass did not think Rick Causey was qualified for his job, but no one from Andersen shared his opinion because they were all close friends with Causey. This is a group error on the part of Andersen’s accountants because they unanimously accepted Causey because of his close relationship with Enron’s managers. 140 Fraudulent Activity: Enron pushed Carl Bass to be “creative” with accounting, so favorable financials could be recorded.
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This note was uploaded on 04/02/2009 for the course AEM 4230 taught by Professor Bogan,v. during the Fall '08 term at Cornell University (Engineering School).

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applied2 - Conspiracy of Fools Part II Raptors Page...

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