Enron's Legacy, Part II
Is That Legal? Not No More!

Under the Sarbanes-Oxley Act, a company's independent auditors will be prohibited from performing nine categories of non-audit services, including: bookkeeping; financial information system design and implementation; appraisal or valuation services; legal and expert services unrelated to an audit; actuarial services; internal audit outsourcing services; broker or dealer, investment advisor, or investment banking services; and management function or human services.

I remember talking to one of my professors about the Enron / Andersen debacle and its causes, and he asked, "Where were the internal auditors?" I said, "Um, I think that internal audit was outsourced to... Andersen." And he exclaimed, "Is that legal?!?" It was then, it ain't no more.

One thing that always disturbed me at school was a line in one of my texts about "consulting services" that read, "Serve the client interest... while maintaining integrity and objectivity." Hey, what a neat trick! Just about the only folks that I can think of who are more conflicted than public auditors are sell-side stock analysts.

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