Whither and Whether Auditor Independence

Daniel Austin Green


"I love beginning an article with a vacuous bromide," says one corporate governance commentator. I shall make do with a worn-out anecdote:

In the fall of 2001, just months after being named the seventh largest company in the world in the Fortune 500, trouble began to sound for Enron. The Houston-based company announced its woes in October, saying that profits had been overstated by almost $600 million over the previous five years. Things would get even worse for shareholders in the company-much worse. Enron announced that its debt payments over the next year were expected to exceed $9 billion dollars, while cash and credit lines totaled only $1.75 billion. Nearly $700 million in debt was due for repayment in just a matter of days and another $3.9 billion of outstanding debt could be demanded for immediate repayment if the company's already-falling credit rating were to be further downgraded. Enron's mounting troubles left little to be thankful for during the week ofThanksgiving. . . .

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