Summary of Facts of the Case Study

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1.0 SUMMARY OF FACTS OF THE CASE STUDY
After understanding the overall of case study, Arthur Andersen: Questionable Accounting Practice, we have identified a few facts. The following subsection will present the facts.

1.1 ARTHUR ANDERSEN
Arthur Andersen LLP was founded in Chicago in 1913 by Arthur Andersen and partner Clerence DeLeny. Over a span or nearly 90 years, the Chicago accounting would became known as one of the “Big Five” largest accounting firms in the United States together with Deloitte & Touche, PricewaterhouseCoopers, Ernst & Young, and KPMG. For most of those years, the firm’s name was synonymous with trust, integrity, and ethics. In its earlier days, Anderson sets standards for the accounting profession and advanced new initiatives on the strength of its then undeniable integrity. The Chicago-based accounting firm closed its doors in 2002 that is after 90 years of business.

1.2 The Advent of Consulting
Leorned Spacek joined the company in 1947 following the death of founder Arthur Andersen. Anderson began providing consulting services to large clients such as General Electric and Schlitz Brewing in the 1950s. Over the next 30 years, Andersen consulting business become more profitable on per-partner basis than its core accounting and tax services business. The company linked its consulting business in a joint cooperative relationship with its audit arm, which compromises its auditor’s independence, a quality crucial to the execution of a credible audit. Andersen’s consulting business becomes recognized as one of the fasters growing and most profitable consulting networks in the world. Ten years later, Arthur Anderson merge it’s operational and business systems consulting units and set up a separate business consulting practice in order to offer clients a broader range of integrated services. Throughout the 1990s, Anderson reaped huge profits by selling consulting services to many clients whose financial statements is also audited. In 1998, then SEC chairman Arthur Levitt publicly voiced this concern and recommended new rules that would restrict the non-audit services that accounting firms could provide to their audit clients that is a suggestion that Andersen vehemently opposed. Nonetheless, in 1999 Andersen chose to split its accounting and consulting function into two separate and often competing units. In August 2000, following an arbitration hearing, a judge rule that Andersen’s consulting arm could effectively divorce the accounting firm and operate independently. By, that time Andersen’s consulting business consisted of about 11,000 consultants and brought in global revenue of nearly $2 billion. Arthur Anderson as a whole employed more than 85,000 people worldwide. The new consulting company promptly changes its name to Accenture the following January and the court later order to better represents its new global brand of accounting services. Meanwhile, in January 2001, Andersen named Joseph Berardino as the new CEO of the U.S. audit practice.

1.3 Baptist Foundation of Arizona
The Baptist Foundation of Arizona (BFA), which Anderson serves as auditor, lost $570 million of donor funds. BFA, an agency of the Arizona Southern Baptist Convention, is founded in 1048to raise and manage endowments for church work in Arizona. The foundation also offered estate and financial planning services to state’s more than 400 southern Baptist churches, and was one of the new foundations to offer investment to individuals. BFA invested heavily in real estate, a more speculative investment strategy than other Baptist foundations in the state traditionally used and the foundation officials allegedly concealed losses from investors beginning in 1986. In addition, more than half of the foundation’s employees were laid off. Finally, the foundation petitioned for chapter 11 bankruptcy protections in 1999, listing debt of about $640 million against assets of about $240 million....
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