Note Arthur Andersen: Shredding the Reputation and Viability of a Once Venerable Accounting Firm |CASE SUMMARY | Four days before the high-flying‚ energy-trading giant‚ Enron‚ disclosed a $618 million loss for the third quarter of 2001‚ an attorney for Arthur Andersen‚ the accounting firm that audited Enron’s books‚ wrote a memo to Andersen employees
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1. What did Arthur Anderson contribute to the Enron disaster? Arthur Andersen (AA) contributed to the Enron disaster when AA consulting became its own separate entity‚ named Accenture. Revenues from consulting services surpassed revenue from auditing services. A natural competitiveness grew between the two rivals and this is where the problems began to start. Management held maximinizing revenues as their primary focus of success and promotions/bonuses were based on this factor. The CEO of AA‚ Joe
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Overview In order “to offer high-quality accounting services”‚ Arthur Andersen (AA)‚ a Northwestern accounting professor started a business to offer services to clients promoting “integrity and sound audit opinions over higher short-run profits”. The company’s “four cornerstones” was good service‚ quality audits‚ well-managed staff‚ and profits for the firm. Their strategy was to focus on quality and high standards of audits rather than profits‚ a very successful strategy that led to consistent
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Arthur Andersen: Questionable Accounting Practices 1. Describe the legal and ethical issues surrounding Andersen ’s auditing of companies accused of accounting improprieties. The legal issues that surrounded Andersen ’s audition were that there was conflict of interest and there was lack of independence on the part of Andersen. In this context‚ Andersen took up lucrative management consultancy projects for the clients of whom it was the auditor. From the deontological ethical perspective
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1. For many years‚ strategy and environment of Arthur Andersen changed especially with regards to the materials. The management of Andersen’s businesses reacted to the changing environment by making the related changes to the organizational architectures such as performance evaluation‚ decision right and reward systems. In the book‚ it is revealed that poorly designed organizations architecture in response to the changing environment in term of material can result into company’s underperformance
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Arthur Andersen: Questionable Accounting Practices Arthur Andersen‚ one of the largest accounting firms in the United States‚ “a name that was synonymous with trust‚ integrity‚ and ethics” (Ferrell‚ Fraedrich‚ & Ferrell‚ 2011‚ p. 348)‚ through a loss of its founder Arthur Andersen‚ and change in its corporate culture resulting in many unethical business transactions that affected multitudes of primary stakeholders had to close its doors in 2002 after 90 years of business. In this report I
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regulations Since the Enron collapsed an array of new laws and regulations has been adopted to tighten corporate oversight. US offices were the first one to come out and implement the policies. Almost all of the firms had their headquarters in the US and they replicated their headquarters policies to a good extend in other offices around the world. Also other governments and regulatory bodies around the world came out with their country specific rules and regulations which are quite similar to the
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Business ethics is an area of ethics that examines ethical rules and principles within a commercial perspective using cases such as: Accounting Irregularities at WorldCom and Arthur Andersen…No More: What Went Wrong? (Business Ethics 4th Ed: Cases 5 & 6 pg.101-109)‚ both clearly present various moral and ethical problems that arise that are real life business scenarios as well as question the impact of certain ‘special’ duties/obligations that apply to particular individuals and employees who choose
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Arthur Andersen was one of the ’Big 5 ’ accounting firms‚ the others being PricewaterhouseCoopers (PWC)‚ Deloitte Touche‚ Ernst and Young‚ and KPMG. Throughout the 1980 ’s and 1990 ’s‚ these five companies provided auditing and tax services to most of the west ’s major companies. However‚ in 2002 Arthur Andersen ’s licences to practice as Certified Public Accountants (CPA ’s) in the US were voluntarily surrendered by the company in the wake of criminal charges relating to the Enron scandal. Although
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1.Arthur Andersen contributed to the Enron disaster by shredding documents‚ which was obstruction of justice‚ by allowing the person in charge of the Enron account to overrule the quality control partner‚ by being revenue focused and by not standing up to its clients‚ and by not changing their internal control policies. 3. The prime motivation behind the decisions of Arthur Andersen’s audit partners on the Enron audits was not for the public interest but for profit and fear of losing clients.
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