Andersen served as Enron's sole auditor throughout the energy giant's sixteen years, also performing internal audits and consulting services. According to Enron's financial statements, Andersen earned $25 million for audit work and $27 million in non-audit fees in 2000.

Shortly after Enron's sudden bankruptcy, the SEC questioned Andersen CEO Joseph Berardino about his firm's inaccurate audit statements and Enron's overstated profits. Berardino told the SEC that Enron's audited statements were misleading since Andersen accountants did not include Enron's money-losing partnerships, like Chewco, in the main financial statements.

The General Accepted Accounting Principles (GAAP) state that the degree of a company's investment in partnerships determines whether such partnerships should be consolidated into the main balance sheets. Enron exceeded the three percent maximum investment in many of its partnerships, such as Chewco, therefore Andersen should have recalculated earnings by including the business deals into Enron's overall balance sheet. Berardino told the SEC that Andersen restated Enron's earnings in 2001 after learning that Enron had invested much more money into the partnerships than it originally claimed.

As the breadth of Enron's alleged fraud became apparent, Andersen fired Houston partner David Duncan on Jan. 16, 2002, saying he ordered the destruction of Enron documents the day after it was learned the government was investigating its financial statements. Andersen also accused Duncan of directing "the deletion of thousands of e-mails and the rushed disposal of large numbers of paper documents."

When asked to testify before the congressional hearing, Duncan cited his Fifth Amendment rights, declining to discuss his involvement or knowledge of the case.

The SEC and several congressional committees continue to investigate whether or not Andersen compromised its professional ethics or violated standards set by GAAP.

Andersen has recently been involved in several other major auditing scandals. Last year, the SEC fined the firm $7 million for 'improper professional conduct', including overstating client Waste Management's earnings by $1.4 billion. It was the first successful case against an auditor in over 20 years. In May 2001, Anderson also paid $110 million to Sunbeam shareholders to settle lawsuits stemming from its inflated earnings statements. Both Sunbeam and Waste Management restated their earnings after admitting fraud in their financial statements.

In mid-June, a federal jury convicted Arthur Andersen of obstruction of justice by destroying Enron-related materials to impede an investigation by securities regulators. The accounting firm, which vowed to appeal the verdict, informed the SEC it would cease auditing public companies by Aug. 31.