Prof. S. Reynolds
December 10, 2012
Arthur Andersen LLP case study
The case “Arthur Andersen, LLP: An Accounting Firm in Crisis” explains the failure of Arthur Andersen, one of the leading auditing and consulting firms in the world, known for professionalism in its field, ethical values, honest accounting and the elimination of conflicts. Andersen was always focused on creating a firm with its own set of business standards. For many years, Andersen's slogan was “Think straight, talk straight.” Once it was a model of strong corporate culture with a dedication to public service and independent truthfulness; in 1996 Arthur Andersen had to face offensive audit failures, a few stemming from the company’s largest clients: Sunbeam, Waste Management, and Baptist Foundation of Arizona. As Andersen looked out for opportunities for consulting fees from existing audit clients, it had succeeded in tripling the per-share revenues of its partners. With every next CEO Andersen more and more struggled to balance the need to maintain its faithfulness to accounting standards with its clients' desire to maximize profits. Worst of them all appeared to be Joseph Berardino. The major case stake holders are:
* Arthur Andersen LLP
Anderson began auditing Enron in 1985. In the beginning they had one of the great success stories up until it was accused in extensive shredding of draft documents and associated communications with Enron. Anderson was aware of serious risks involved in the audit of Enron, but still was willing to retain Enron as a client. Enron’s private partnerships involving related party transactions allowed Enron to keep the partnership losses off of its books, assuring that they will not be shown on Enron’s balance sheet. Finally facts of losses started to speak for themselves, shareholder's equity decrease by $1.2 billion and on December 2, 2001 Enron filed for bankruptcy. Suspecting Enron of financial...