"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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