Enron and Arther Anderson

In 2001, Enron was a leading Fortune 500 Company that sold energy and commodities. The company was worth over 100 billion dollars, and seemed to be just another giant and steady corporation. In late 2001 though, Enron filed for bankruptcy, shocking its investors and America. A trial was conducted to search for how this multi-billion dollar company with no signs of failure, could suddenly have lost the entirety of its capital. This is how the investigation into Arther Andersen began. Arther Andersen was a longstanding financial firm, considered to be one of the five biggest in the country, that had recorded the entirety of Enron's transactions. What essentially occured was a mass forgery of accounting documents, where Arther Andersen would falsify their balance.

As an example, the firm of Arther Andersen would overstate the actual assets that the company owned, and thus overstating the company's capital. For Enron, this was undoubtedly attractive since the more capital the company seemed to be bringing in, the more investors it would get. The case of Enron shows how influential accounting is, and more so how powerful it is. Arther Andersen's role in carrying out the falsification of accounting records sheds light on how errors in accounting, whether purposely or not, affect the entire way our economy functions.

http://www.nysscpa.org/cpajournal/2006/1106/infocus/p14.htm
http://www.time.com/time/business/article/0,8599,193520,00.html