February 11, 2013
Ethics And Advocacy For Hr Pro- HRM 522
Assignment #3 - Arthur Anderson: Questionable Accounting Practices
1. Discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted in 1999. The provisions of Sarbanes-Oxley Act help minimize the likelihood of auditor failing to identify accounting irregularities by the following requirements: 1). Improving the internal control. Auditors comment on the internal control of the firm should be reported. 2). Reinforcing supervision for financial irregularities. This act boosts to establish an independent the Public Company Accounting Oversight Board, which is responsible for overseeing the performance of the certified public accountants and the accounting firm. 3). Strengthening the independence of auditors. It means that the act restricts auditors to audit activities only. 4). Encouraging financial disclosure. It also provides whistle-blower protection. 5). Increasing the penalties of ethical and legal misconducts. There are severe monetary and criminal punishments imposed on those auditors that give false statements. Further, the act lays down the quality of auditing required, the quality of control, and independence standards and rules. 2. Discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted in 1999. One specific provision that could help greatly is Section 203, or Auditor Partner Rotation. This section calls for auditors to rotate partners assigned to clients, so that fresh eyes can review the work that has been done. This helps to prevent the “partner in crime” relationship that contributed to Andersen’s downfall. Finally, the provisions make the entire auditing process more transparent, so that people on the outside of the company such as shareholders, can easily see what is...