In 2001, energy trading company Enron had well, let's call it a few problems. For that matter, so did Arthur Anderson, the company’s accounting firm...but we’ll get to that.
A handful of Enron executives had spent the previous few years using a variety of accounting tricks to hide massive losses at the firm. As a result, they got rich off of stock options and self-dealing side hustles using the company’s assets.Through it all, Arthur Anderson, acting as the company’s auditor (meaning the firm was fundamentally in charge of making sure Enron’s books were correct) signed off on the dodgy balance sheet. It all came to a head in 2001, when the company imploded in a flurry of massive write downs and indictments of top executives.
Eventually, Arthur Anderson itself was found guilty of various infractions, including shredding documents in an attempted cover up. The conviction was eventually overturned, but the scandal led to the so-called “Anderson Effect”...basically, after that, auditors would be reluctant to be push overs for the companies they worked for and conduct a more stringent review of results.
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Finance: What is Acting Against Recommen...2 Views
finance a la shmoop what is acting against recommendations hmm
let's say you head to the emergency room with stomach pains the doctor in charge [Man driving fast with stomach pains]
says yep you've got appendicitis but I'm brutally
tired so I recommend you go home well odds are if the doc himself had [Doctor in pain with stomach pains]
appendicitis he'd get someone to take that puppy out stat acting against
recommendations is kind of like that just in the financial world if your
broker tells you to do something he wouldn't recommend for his own [Man discussing finance with his broker]
investments well he has a duty to tell you that he wouldn't do that same thing
in his own case that usually happens when some bonehead tells a broker, hey I
want to bet my life savings on this new IPO well why would anyone act against
recommendations well in the case of the doc maybe he's so tired that he's a [Doctor holding scalpel and falls to the floor]
dangerous menace in the O.R... In the case of your broker well maybe there's
something about your specific situation that makes acting against recommendation
the way to go well as long as they tell you that it's against recommendations
well, they're legally in the cure just don't ask that broker to perform
your kidney transplant [Broker walks into office]
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