Whether former Arthur Andersen accountants violated professional standards and should be subject to sanctions for their audits of Enron more than 15 years ago has been a subject of protracted litigation. In the latest round, last week, three accountants were rebuffed by a Texas state appeals court which held that state regulators followed appropriate procedures in sanctioning the accountants in connection with audits of Enron completed in 1997 and 1998. The plaintiff accountants had their professional licenses revoked or suspended after the Texas State Board of Public Accountancy (the Board) reviewed the accountants’ approval of Enron’s off-balance sheet treatment of two entities, which resulted in artificially increasing the company’s income. The Board had overruled decisions of an administrative law judge, who had recommended far less severe sanctions. The plaintiffs sought judicial review of the administrative ruling, claiming that the Board reach its decision in illegal closed-door sessions.
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