The MF is exactly right in that the biggest scandal in the Enron collapse is the complicity of Anderson in Enron's accounting fraud.

But punishment is not likely to change the behavior of auditors, because the incentive structure at the big accounting firms is badly screwed up.

Here's how the system should work. In order to attract outside investment, a company needs (among other things) to be able to convince investors that its financial statements are accurate. An outside auditor is useful in convincing investors of this, to the extent that the auditor is perceived to be honest and independent. Essentially, the auditor is selling their credibility and reputation for trustworthiness. So the company has an incentive to hire a credible auditor (to help it attract capital), and competition means that accounting firms have an incentive to be honest (because they will attract business in proportion to their reputation).

However, in the US there are two points at which this nice model breaks down. First, the big accounting firms make most of their money from management consulting, not from accountancy. So here's the first conflict of interest: when auditing a big firm, the accountancy has an incentive to sweep irregularities under the rug, because the revenue from the consulting can be bigger than potential lost auditing business in the future. Second, there are only a few big accounting firms -- Andersen, Deloitte and Touche, Ernst and Young, KPMG, and PricewaterhouseCoopers. With such a small number of accountancies, its possible for them to cartelize and lower their standards of trustworthiness, since a big firm has no choice but to employ one of them. So in this case it's possible for the accountancies to engage in a "race to the bottom".

To avoid similar scandals in the future, first, what the SEC needs to do is to forbid the accountancies from doing management consulting. And second, the Justice Department needs to use antitrust law to break up the accounting firms so that there's more competition in the market.