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To: Bill who wrote (57846)	2/21/2002 4:06:46 PM
From: Eric	Read Replies (2) \| Respond to of 77400

Bill The big problem with Enron is the offshore stuff. If they truly did create shell companies to do this stuff then it really looks bad. It just doesn't pass the smell test. Eric

To: Bill who wrote (57846)	2/21/2002 4:21:16 PM
From: RetiredNow	Read Replies (3) \| Respond to of 77400

Hi Bill, one of my very first jobs a couple decades ago was at an audit firm and I remember asking my manager about how they thought we were doing any good. For instance, I'd look at revenue and based on my materiality level, I'd get a statistical sample of revenue line items from the G/L I needed to audit. Then I'd ask for invoices and shipping materials for those revenue line items. Pretty foolproof right? Wrong. What you have there was a system that was not designed to find fraud. What if they made a bunch of sales that they never recorded in the G/L? What if they made a sale to a fraudulent company and then shipped the goods FOB shipping and then I saw it on the G/L? How would I know that company was a sham? As long as I had the invoice and shipping advice, it would all look kosher to me. In addition, what the hell do junior auditors straight out of college know about anyway? Even the top 10% graduates just don't have the experience or contact with senior management to really be able to ferret out the fraud. It would really take a lucky break to be able to detect fraud in a collusive environment like Enron's. The real culprits are the partners and managers of the audit firms. They are the ones who sign off on what is permissable under GAAP. They would have to have been consulted on all those partnership deals for instance. If they weren't, then more than likely they would have gotten wind of it anyway, because they see the big audit picture. Anyway, pure fraud hasn't been proven yet, but it's just a matter of time. This whole thing smells like fraud on a grand scale.