What Happened at Arthur Anderson" and "Why?

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"What happened at Arthur Anderson" and "Why?"

Arthur Andersen, who used to be one of the “Big Five” largest accounting firms in the

United States, strayed away from accepted policies and stuck in a string of accounting

scandals, finally closed its doors after 90 years of business. The firm’s name was

synonymous with trust, integrity and ethics during a long period of time, however,

Andersen failed to withstand the pressure from the competition of consulting service.

Thus, it leaded to a negative influence on Andersen's corporate culture, which enabled

Andersen to be more interested in its own revenue growth through ethical and legal

misconducts, such as accounting irregularities and fraud. More seriously, it developed a

number of lawsuits from1997 to 2005, which impelled the SEC to keep a close watch on,

from its client such as Baptist Foundation of Arizona, Sunbeam, Waste Management,

Enron, WorldCom, Global Crossing, and Qwest Communications. Especially Enron’s

bankruptcy was a deadly strike of Andersen. Andersen’s collapses made an effect on the

regulation on accounting ethics, for instance, the Sarbanes-Oxley Act passed by the

congress in 2002.

Enron Corporation has been accused of cooking the books and overstating company

profits in its financial reports. In addition, Enron’s trading business adopted mark-to-

market accounting, which meant that once a long-term contract was signed, income was

estimated as the present value of net future cash flows, even though in some cases there

were serious questions about the viability of these contracts and their associated costs.

Arthur Anderson was Enron's auditors and accountants. On one hand, Andersen was

auditing an Enron financial recording system and strategy based for the most part on the

advice of its own consultants. The allegations are that thousands of Enron documents

were destroyed by Enron executives, even after official inquiries began...
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