What could have been done to avoid the conflicts of interest you identified?

The conflict of interest between the two roles played by Arthur Andersen, as auditor but also as consultant to Enron; the lack of attention shown by members of the Enron board of directors to the off-books financial entities with which Enron did business; and the lack of truthfulness by management about the health of the company and its business operations. In some ways, the culture of Enron was the primary cause of the collapse. The senior executives believed Enron had to be the best at everything it did and that they had to protect their reputations and their compensation as the most successful executives in the U.S. When some of their business and trading ventures began to perform poorly, they tried to cover up their own failures. Greed and a lack of fundamental ethical values drove a potentially successful company into the ground. Had the executives of the corporation instilled values into their corporate culture that reflected dealings with them and others in a value driven and ethical light; Enron might have never collapsed and tens of thousands of lives wouldn’t have been ruined. Businesses need to establish a policy by which conflicts of interest between a business and its board, employees and contractors are avoided. In this policy, identify/list what situations constitute unethical conflicts and charge a committee with the responsibility of implementing the policy by screening for the conflicts listed. Such a policy should also clearly state all the potential resulting actions the organization may take in response to any conflict of interest found in regard to any individual already associated with the organization and any candidates for hire (Williams, n.d). How would you change the laws to correct the problems that came up in the Enron and Arthur Andersen case? As a result of these scandals, the United States Government has passed the Sarbanes-Oxley Act of 2002 to restore the reliability of the public company audit process by, among others, prohibiting auditors from rendering consulting services for the company they are auditing. To address the potential conflicts of interest which can arise, Sarbanes Oxley established a variety of requirements which govern auditing and accounting firms. Some of the notable requirements include auditor reporting duties and a restriction which prohibits auditing firms from providing non-audit related services to companies which they audit. Provisions were also put in place to prevent corporate analysts from benefiting from conflicts of interest, including the public disclosure of any potential conflicts of interest (Naylor, 2014). I believe accounting regulations should be altered to prohibit ownership of both auditing and consulting services by the same accounting firm. Accounting firms are already moving to sever their consulting businesses. The SEC should probably adopt additional disclosure requirements. Various regulators should tighten requirements for directors to be vigilant and provide protections for whistleblowers who bring improper behavior to public attention. But, in the final analysis, the solution to an Enron-type scandal lies in the attentiveness of directors and in the truthfulness and integrity of executives. Clever individuals will always find ways to conceal information or to engage in fraud. Explore how Enron and Arthur Andersen might have been encouraged to act ethically other than direct legal pressures.    The board of directors was not attentive to the nature of the off-books entities created by Enron, nor to their own obligations to monitor those entities once they were approved. The board did not pay attention to the employees because most directors in the United States do not consider this their responsibility. They consider themselves representatives of the shareholders only, and not of the employees. However, in this case they did not even represent the shareholders well-and particularly not the employees who were shareholders. Enron used the special enterprise entities as a way of hiding its huge amounts of debt from its investors. It is in the best ethical practices to fully disclose the financial situation as correctly as possible to investors even if it reflects a bad financial position. The management of Enron acted in conflict of the financial disclosure standards by deliberately hiding information from investors through the use of the special partnerships. The use of complex and creative accounting methods by Enron’s management was in conflict of the investor wealth maximization principle. These accounting methods were used to keep the real financial position of the company from investors. The company’s auditors put their actions in conflict with the expected standards that require them to provide an unbiased opinion regarding the completeness and correctness of the company’s financial statements. By hiding the actual details of the true financial position of the company, the auditing firm actions conflicted with the internationally accepted auditing standard and norms. The management of the company was more concerned about its pay packages rather than the protection of investors’ funds in the company. Their actions were geared towards earning higher pay and bonuses. This is in conflict with the business expectation that the actions of the management and employees should always be towards the protection and growth of investors’ investments (Paypervids, 2018). References Naylor, Tabitha. (2014, April 04). How The Arthur Anderson And Enron Fraud Changed Accounting Forever. Retrieved from URL https://www.benzinga.com/markets/14/04/4429482/how-the-arthur-anderson-and-enron-fraud-changed-accounting-forever   Williams, Jennifer. (n.d.). How How to Avoid a Conflict of Interest. Retrieved from URL http://smallbusiness.chron.com/avoid-conflict-interest-817.html   PayPerVids. (2018, February 22). The Rise and Fall of Enron: Ethical Issues. Retrieved from URL https://www.paypervids.com/rise-fall-enron-ethical-issues/