Case Analysis Arthur Andersen: Questionable Accounting Practices

Topics: Enron, Business ethics, Big Four auditors Pages: 3 (1012 words) Published: May 8, 2011
Case Analysis
Arthur Andersen: Questionable Accounting Practices
Arthur Andersen LLP, which is over a span of nearly 90 years, would become one of the "Big five" largest accounting firms in the United States. Moreover, the accounting firm seen as the symbol of trust, integrity and ethic. The good reputation is derived from the advent of consulting business, which was developed by Leonard Spack. However, with the growth of consulting services, many accounting firms viewed it as a sccessful model that should be emulated, so that the competition pressure increasing sharply. Eventually, Andersen failed to withstand the pressure. 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, and Worldcom. Especially for the SEC to Enron's investigating, it would be a deadly strike of Andersen. Until 2005, the Supreme Court threw out the lawsuit for Andersen. Nevertheless, the accounting firm would be difficult to rebuild its original business status.

●Answer the questions
1. Describe the legal and ethical issues surrounding Andersen's auditing of companies accused of accounting improprieties. The legal issues that surrounded Andersen's auditing were showed at two aspects. For one thing, there was conflict of interest between consulting business and auditing business. Obviously, Andersen had been confused by huge profits of consulting services to develop consulting business excessively but to ignore audit. For another thing, there was lack of independence on the part of Andersen. In this case, Andersen provided the clients whose finance statements it also audited with profitable...
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