Week 2 Checkpoint- Unethical Practices of Arthur Andersen
1.What did Arthur Andersen contribute to the Enron disaster? Arthur Andersen contributed to the Enron disaster by failing to have Enron establish and enforce internal controls. Also by destroying Enron audit papers which covered deficiencies contributed to the Enron disaster. The formal charges and jail sentence were a result of the obstruction of justice caused by the destruction of the audit papers. 3. What was the prime motivation behind the decisions of Arthur Andersen’s audit partners on the Enron, Worldcom, Waste Management, and Sunbeam audits; the public interest or something else. Cite examples that reveal this motivation.- The prime motivation behind the decisions of Arthur Andersen’s audit partners was revenue generations. They wanted to make money plain and simple. The audit partners wanted to make sure that they made a profit and kept the clients that made them the profit. Proof of this is AA use of SPEs to make false profits and also to hide the losses. This shows that they would do whatever it took to make sure they made money and to keep their clients happy.
4. Why should an auditor make decisions in the public interest rather than in the interest of management or current shareholders? Auditors should make decisions in the public interest rather than in the interest of management or current shareholders because they have taken a pledge to do so. Also because making decisions in the public interest is the ethical way that they should conduct their business. As we have learned from the Enron disaster making unethical business decisions doesn’t benefit anyone in the end.
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