1. Case 2.4 Enron: Quality Assurance
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2. Enron Case Relevant Technical Knowledge
PCAOB QC #20 - Paragraph #3
“A firm has a responsibility to ensure that its personnel comply with the professional standards applicable to its accounting and auditing practice. A system of quality control is broadly defined as a process to provide the firm with reasonable assurance that its personnel comply with applicable professional standards and the firm's standards of quality.”

3. Enron Case Relevant Technical Knowledge
SARBOX Section 103
The PCAOB shall: 1) register public accounting firms; 2) establish, or adopt, by rule, auditing, quality control, ethics, independence, and other standards relating to the preparation of audit reports for issuers; 3) conduct inspections of accounting firms; 4) conduct investigations and disciplinary proceedings, and impose appropriate sanctions; 5) perform such other duties or functions as necessary or appropriate; 6) enforce compliance with the Act, the rules of the Board, professional standards, and the securities laws relating to the preparation and issuance of audit reports and the obligations and liabilities of accountants with respect thereto; 7) set the budget and manage the operations of the Board and the staff of the Board.

4. Enron Case Relevant Technical Knowledge
SARBOX Section 203
the lead audit or coordinating partner and the reviewing partner must rotate off of the audit every 5 years
SARBOX Section 206
requires a “one year cooling off period” before an audit firm employee accept a position as CEO, CFO, Controller, or Chief Accounting Officer of a former client

5. Psychology Literature - How to Best Acquire Knowledge
Feature Repeated Case Experiences with Feedback; and
Teach Technical Concepts within Real-Life Contexts
Consider the following additional cases:
The Fund of Funds: Independence
Sunbeam: Due Care
WorldCom: Professional Responsibility

6. Epilogue - Enron
Cliff Baxter, Vice Chairman, committed suicide due to fraud
Arthur Andersen indicted for obstruction of justice due to destroying evidence and barred from auditing public companies for five years
Former CEO Jeffrey Skilling sentenced to 24 years in prison

7. Epilogue - Enron
Founder Kenneth Lay dies from a heart attack before his sentencing
Many top Enron executives were sentenced to multi-year prison terms.
Eligible shareholders will receive $7.2 billion in settlements for their investment losses