The real world of Enron's auditors

It is always pleasing when events in the ‘real world’—with heavy inverted commas—bring to prominence the significance of pre-existing research agendas. Current nostrums about the ‘relevance’—again heavily accented—of management and organizational research claim that we should ambulance chase whatever the latest business concern may be.1 Yet, as I have argued elsewhere, this is a simplistic and myopic prescrip-tion.2 This is well illustrated by the Enron scandal which has brought to the fore a range of research insights—for example, those concerned with corporate governance and accounting, which might hitherto have been dismissed as esoteric. In this short piece, I will draw upon insights from my research, and research with other colleagues, over several years into the internal organization of the big audit firms.3 These firms, which now number just four, have a stranglehold on the market for audit but they are also notoriously secretive, so that very few researchers have been allowed significant access into their day-to-day operations. As part of a team which overcame those access barriers, I want to explore what light the research sheds on one of the key aspects of the Enron affair: the conduct of its auditors, Arthur Andersen, which also collapsed in the wake of the scandal. More specifically, I want to offer a ‘cultural ’ explanation of Enron’s auditors, focusing on the social processes and practices which apparently lay behind these events. In so doing, I aspire to present a more nuanced picture than that offered in what have been the two dominant political and media responses to Enron. The first of these has been an attempt to apportion blame in an individualistic fashion, so that the problem is a few ‘bad apples ’ (whether in Enron or Andersen) infecting an otherwise robust system. The second main response has been to apportion blame in a systemic fashion, so that the problem is a corrupt and immoral system over-riding any possibility of individual morality or, even, agency.