CAP Forum on Enron: What If Andersen Had Shredded in Toronto or Calgary? The Potential Criminal Liability of Canadian Public Accounting Firms*

Abstract

ABSTRACTBoth Canadians and Americans often assume that the legal system, like many other aspects of society, works the same in both countries. Just as these assumptions often fail to stand up to detailed scrutiny, so too may the assumption that Arthur Andersen LLP could have been charged with and convicted of obstruction of justice in Canada. In this paper, we examine the hypothetical question of what would have happened if a public accounting firm had shredded documents, fearing a provincial securities regulatory investigation in Toronto or Calgary. We examine the key differences between both the law and the institutional environment in Canada and the United States to determine whether such a prosecution could occur in Canada. We find that the letter of the law would probably have resulted in a successful prosecution. However, because of differences in the institutional environments, a criminal prosecution of a Canadian public accounting firm would probably never have occurred. The implications of this conclusion are discussed.