News -- 2002 January 17;Letter sent from Charles A. Bowsher to Robert D. Neary

              News
January 17, 2002
Mr. Robert D. Neary
Chair
Quality Control Inquiry Committee
c/o Ernst & Young LLP
1300 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115-1405
Dear Mr. Neary:
The Quality Control Inquiry Committee (QCIC) of the American Institute of Certified Public
Accountants (AICPA) is a critical part of the accounting professions self-regulatory
program and a vital complement to the peer review process. We recognize that the QCIC
will be reviewing Arthur Andersens quality control system as a result of pending litigation
alleging deficiencies in Andersens audit of the financial statements of Enron Corporation.
The review should cover Andersens audits of Enron for the year 2000 and relevant prior
years to determine whether the alleged audit deficiencies indicate a need for corrective
measures by Andersen in its system of quality controls and whether restrictions should be
placed on Enron engagement personnel pursuant to the QCICs recently adopted
disciplinary process (beyond those recently taken by Andersen).
As you know, the recent Enron collapse has created deep concern among Congressional
Committees and regulators and has been the subject of continuing media coverage. The
scope of these inquiries is evolving, but certainly is focusing on: what happened, how did
it happen, why did it happen so quickly, and what can and should be done to avoid similar
events in the future.
Given the Public Oversight Boards oversight authority with respect to the QCIC, and as
part of the POBs mission to act in the public interest, we believe that protecting investors
and maintaining confidence in our capital markets is essential. In this spirit, the POB
requests that the QCIC look into the performance of Andersen, the audit partners and the
other senior members of the audit engagement team in Enron as soon as possible to
determine whether the facts indicate deficiencies in Andersens system of quality controls
and whether the audit engagement team complied with professional standards, relating
to, for example, disclosure standards, special purpose entities, contingent liabilities,
issuance of equity securities, energy trading contracts, waived adjustments, and related
party transactions. Particular focus should be on off-balance sheet financing.
The POB also would appreciate it if the QCIC would look into discussions between
Andersen and Enrons audit committee concerning Andersens evaluation of the critical