Conspiracy of Fools: Who’s In Charge?

The partners at Arthur Andersen were having another argument about the management of the Enron account. As usual, Enron executives were throwing their weight around and trying to dictate who could be involved on their engagement. Specifically, they didn’t want Carl Bass to work on their account because he fought for the proper accounting treatment of items, not the creative ways that Enron used to enhance their financial statements.

Above all else, the partners at Andersen wanted to retain their consulting work with Enron. That was what really paid the bills, while the lower-paying audit work was more of a nuisance.

Bass, however, was flabbergasted. To his way of thinking, clients couldn’t boss accountants around like this. Accounting judgments were based on the rules, not the person. Bending to Enron’s demands was sure to have a chilling effect, maybe nudge Andersen partners to loosen up their interpretations. Then again, Bass figured that was what Enron wanted to achieve.

“Gary, I’m stunned,” Bass said. “If they don’t want me involved, that’s their call, I guess. But I can’t believe the firm is going along with this.”

“We’ve attempted to talk to them –”

“Gary, it shouldn’t be their call!” Bass retorted. “Them, of all clients. A high-risk, maximum-exposure client! And we’re letting them dictate to us what our quality-control procedures should be!”

Maximum exposure was right. Enron eventually became the downfall of Arthur Andersen.