Futures-trading firm Refco Inc. teetered on the edge of insolvency Friday, as scandal threatened to take down another major U.S. company, four years after the collapse of Enron Corp.

The rapid fall of Refco, which on Friday began shutting down one of its largest operating units, raised questions that many investors hoped were answered after accounting scandals at Enron, WorldCom Inc. and other big companies.

Among those questions was how such a long list of brand-name advisory firms could scrutinize Refco's books and not find the alleged fraud, which prosecutors have described as a scheme by former chief executive Phillip R. Bennett to keep as much as $545 million in bad debts off of the company's books, inflating earnings and bolstering Refco's stock price.

Bennett was arrested on Tuesday and on Wednesday was charged with stock fraud for allegedly misleading investors who bought shares in Refco's initial public offering in August. The company said Friday that it was beginning to shut down one of its main operating units, Refco Securities LLC. Refco's stock price has plunged because of the scandal, wiping out more than $1 billion in shareholder value. The company's bonds also have plummeted.

The rapid descent into scandal has embarrassed firms that advised Refco and signed off on its books, a group that includes public accounting firm Grant Thornton LLP, private equity firm Thomas H. Lee Partners and Wall Street investment banks Goldman Sachs, Credit Suisse First Boston and Banc of America Securities LLC.

Goldman this week signed on as a financial adviser to Refco and has been trying to help the company find fresh capital. Some observers criticized Refco's decision to hire Goldman as an adviser after the firm failed to uncover the alleged fraud before the August IPO.

"To me, that was a desperate attempt to slather themselves in respectability that wasn't terribly well thought through," said Michael Greenberger, a law professor at the University of Maryland and a former regulator with the Commodity Futures Trading Commission. "Goldman has its own problems here."

Goldman has been talking with regulators and other financial firms about finding a buyer for Refco or guaranteeing that Refco will not default on any of its trading positions.

In a statement on Friday, Grant Thornton said it was continuing to investigate what happened at Refco. "While our professional consideration is still underway, it appears to be a purposeful deception that required participation by senior management, hidden well enough to also evade numerous other detailed financial inspections performed by many of the most well-respected financial institutions in the country," the statement said. The Public Company Accounting Oversight Board has started an inquiry into Grant Thornton's work for Refco.

A spokesman for Thomas H. Lee, the Boston-based private equity firm that helped bring Refco public and remains one of its largest shareholders, declined to comment on Friday, citing ongoing criminal and regulatory investigations and the possibility of shareholder lawsuits against Refco. Media representatives for Goldman, Credit Suisse and Banc of America also declined to comment.

But executives at several of those firms privately echoed the Grant Thornton statement, saying the alleged fraud was perpetrated at the highest level and was so well concealed that even diligent investigation could not have detected it.

Accounting and corporate-governance experts on Friday questioned that assessment. They said the alleged fraud appears to have been fairly straightforward.

According to prosecutors, Bennett repeatedly engaged in a series of circular transactions at the end of Refco's recent fiscal quarters. Prosecutors say these transactions were designed to disguise debt owed to Refco by a private entity controlled by former chief executive Bennett.

For example, prosecutors contend that in late February, a Refco subsidiary, Refco Capital Markets Ltd., lent an unidentified Refco customer $335 million to be repaid in March. On the same day in February, according to the criminal complaint against Bennett, the unidentified customer lent the Bennett-controlled entity, Refco Group Holdings Inc., $335 million. Refco Group Holdings then allegedly used the money to pay down its debt to Refco Inc.

According to prosecutors, the transactions had the effect of temporarily moving debt off of Refco's books and onto those of the customer, identified as New Jersey hedge fund Liberty Corner Capital.

Kevin Marino, a lawyer for Liberty Corner Capital, said the fund's managers viewed the arrangement as a standard transaction, in which it profited by lending money to one Refco unit at a higher rate than it paid to borrow money from another unit. "This wasn't a terribly complicated transaction as far as Liberty was concerned," Marino said. "It's exactly the kind of short-term transaction hedge funds do all the time."

But J. Edward Ketz, an accounting professor at Penn State University, said the fact that the circular transactions with Liberty regularly occurred at the end of fiscal quarters and were then unwound after the quarters ended should have raised alarms at Refco's audit and underwriting firms. "That will probably be a major point of contention as the lawsuits unfold," he said.

Class-action attorney Melvyn Weiss said his firm, which has already filed a shareholder action against Refco, would soon add the accountants and underwriters as defendants. "It would seem very difficult for the underwriters and accounts to have done true due diligence without being able to have uncovered this kind of wrongdoing," he said.

Former Refco CEO Phillip R. Bennett was arrested.

Refco Inc. brokers trade crude oil futures at the New York Mercantile Exchange. Refco is winding down its regulated broker-dealer unit, Refco Securities LLC.