CASE PREPARATION CHART

Student Name

Toh Xinyi

Student ID

1092701353

Submission date

6th November 2013

Case title

Androids Under Attack

Case analysis

STAGE 1
Key players
Num.

Who?

Position/roles

Main decision
Whether to shred selfincriminating documents that
are related to Enronaa
Whether to follow or disagree
with David to shred documents

1.

David Lawrence

Partner in Androids/in charge of

auditing Enronaas accounts

2.

Ken Bailey

Junior partner in Androids/helps

David in making decision

Issues
Explain the main issues underlying the case. Place extra attention on the what, why and when.
The main issue in this case of Androids is whether David Lawrence, the partner of Androids who is in
charge of auditing Enronaas accounts should follow the e-mail from Nancy on the policy of routine
document shredding and comply with the firms documents retention policy or not. David faces with
this dilemma in order to destroy self-incriminating audit working papers as to preclude having legal
evidence against the firm in court and to prevent further action from the Securities and Exchange
Commission (SEC). The audit working papers will be in doubt of the responsibilities of Androids in
the collapse of Enronaa and eventually, leads to the end of business of Androids with another
scandal in the likes of Enronaa.
This is because Androids has been approving the accounting practices that allow Enronaa to hide its
large debts and failed projects and to inflate its income. There are many off-the-books partnerships
of Enronaa such as Chewco and Chewbacca that has not been properly accounted for and are not
independent entities. An investigation of Enronaas accounts would cause millions of debt and losses
to be revealed.
The independence of the auditors of Androids in charge of the Enronaas accounts will also be in
doubt for the huge fees amounting to USD 100million per annum. Further, Casey who was a former

employee of Androids and was in charge of the Enronaas accounts is now the chief accounting
officer of Enronaa and still has close relationship with David Lawrence. Thus, it is envisaged and
without a doubt, the relationship between the audit firm and Enronaa can raise the questions of the
conflict of interest of the auditors and its credibility of its audit work into a doubt.
Hence, Androids could not afford any other scandal as the firm was found guilty in issuing materially
false and misleading audit reports on Solid Waste financial statements from the year of 1993 to 1996
and in engaging non-independent and improper professional conduct. As a result, Androids is
obliged to a civil penalty of USD 7million to the SEC due to the firms work as auditors of Solid Waste
and the firm is now under probation with the SEC which forbade it from future misconduct. For all
these reasons, David is in the decision whether to destroy the e-mails and audit working papers
pertaining to Enronaa.

STAGE 2

PART I: Decisions

Key player

David Lawrence

No. Main decision

1.

Shred self-incriminating
documents related to
Enronaa

Key player

Alternatives

Benefits the firm; survival

of the firm; ethicality;
legality; achievement of
obligation

Shred self-incriminating
documents; do no shred
documents

Decision criteria

Alternatives

Benefits the firm; survival

of the firm; ethicality;
legality; achievement of
obligation

Support; disagree

Ken Bailey

No. Main decision

1.

Decision criteria

Agree or disagree with

Davids decision

PART II: Evaluations

Key player

Ken Bailey

Main
decision

Agree or disagree with Davids decision to shred documents related to Enronaa

Decision criteria

No. Alternative

Benefits the
firm

Ensures the
firms
survival

Legality

Ethicality

Achievement
of obligation

1.

Agree

Yes

Maybe

No

No

No

2.

Disagree

Yes

Maybe

Yes

Yes

Yes

Preferred alternative & predicted outcomes:

Ken Bailey, as a junior partner is responsible for aiding David who is a senior partner in decision
making. Nonetheless, Ken should understand that his responsibility as an auditor is not only
towards the customers and partners of Androids but also towards the stakeholders and public.
From the point of view of the partner of Androids, Ken should support with Davids decision to
shred the documents as the benefit of the firm as a whole to avoid being charged in the court.
However, from the point of view of the public, Ken should disagree with David of his decision as it
is not professional and ethical to do so and the firm might get charged of obstruction of justice and
destruction of evidence.
Such being the case, Ken should seek advice from the higher level of management such as the
other senior partner of Androids and if he could not get a satisfactory response, he should report
the matter to his professional body and also consider taking an independent legal advice.
Supporting notes/evidences:
This dilemma facing by Androids can be seen in the case of Arthur Andersen, the auditor of Enron
Co. After learning of investigation of Enrons accounts by the Securities and Exchange Commission
(SEC), Arthur Andersen faced the same crisis as the Androids and made the decision to shred all
the documents related to Enron.
The firm was charged with the conviction of obstruction of justice for shredding thousands of
documents and e-mail messages pertaining to its audit of Enron from 1997 to 2000. As a result, the
firm surrended its Certified Practising Accountants (CPA) license and brought damages to its
reputation, resulting in loss of customers and public trust and unemployment of 85, 000
employees.
Therefore, as in the case of Arthur Andersen, it is pertinent to take note that an action taken
should be ethical even if it is not in the best interest of the firm as a whole. It is also vital to make

decision based on all alternatives considering all stakeholders interests as well as the public
interest. Destroying evidence due to own self interest will not only help to worse the problems but
it is unethical and unprofessional. Hence, as in the case of Arthur Andersen and Androids, it is
important to seek advice from the professional bodies to avoid further problems.
The firm will also be convicted of obstruction of justice as in the case of Arthur Andersen under
Section 204 of the Penal Code 2013 for destruction of document to prevent its production as
evidence. Under the law, the firm shall be punished with imprisonment for a term of two years or
fine or both.

PART IV: Action & Implementation Plan

Who

Ken Bailey

What

Disagree with Davids decision and does not shred the documents

When

After discussion with David regarding his decision

Where

Androids office

How

Seek advice from the other senior partner and consequently, report the matter to
professional body

Missing information:
Firstly, it is uncertain of the level of Ken Baileys level of commitment and work in the audit of
Enronaas accounts.
The independence of lawyers of Androids is not known as it would determine whether the
documents retention policy should or should not be complied with.
The hierarchy of power and authority in Androids is not given in this case.

Assumptions:
Ken Bailey will act in the best interests of the firm as a whole.
The lawyers of Androids will commit to the best interest of the firm as a whole.
The partners in Androids Chicago headquarters have more power and authority than David
Lawrence and hence, their decision can outweigh Davids decision.

Time taken to complete this chart: 6 hours