1) What Did Arthur Andersen Contribute to the Enron Disaster?

Arthur Anderson Limited Liability Partnership (LLP) was established in 1913 into the Accounting industry. They offered tax, consulting, and, auditing services to large corporations everywhere. Their headquarters were located in Chicago, Illinois and eventually had over 85,000 employees in 84 different countries (Collins, 2016). By the 1990’s Arthur Andersen had become one of the largest accounting firms, and was recognized as one of the “big five.” Along with being one of the largest accounting firms Arthur Andersen was also one of the most reputable. There were many factors that distinguished Arthur Andersen from other accounting firms, and the most notable were the honesty and integrity Arthur Andersen had established for the company (Moore & Crampton, 2000). Andersen set high standards which in turn resulted in the growth of their prestige. Many companies came to Arthur Andersen because of the trust it had established in the public and in the accounting Industry. One of the ways Arthur Andersen established their reputation was through their organizational structure and the culture of the company.

How much reliance should Enron’s corporate BOD have placed on the Andersen in understanding the company’s accounting decisions and policies?

Andersen – Although Enron committed the fraud, Andersen allowed Enron to get away with it. An audit firm has to be independent from their client and act in the best interest of the public. For this reason, I think that Andersen was the most responsible for the Enron crisis. Andersen could have declined continuing their relationship with Enron as their client, considering some Andersen representatives did not agree with Enron’s “aggressive” accounting and financial reporting decisions in the early months of 2001. Andersen also assisted Enron in restructuring some of the SPEs so they would still be considered unconsolidated entities. Andersen not only audited Enron, but they also went beyond the scope of what the quality audit should entail. It was also telling when personnel in the Houston office destroyed documents related to Enron and

The Security Exchange Commission found that The Enron corporations CEO’s and executives hindered the company’s research methods by using information to reveal how the top leaders of the organization assisted and supported the unethical behaviors in the accounting and finance departments. These acts deteriorated the integrity of excellence professionals, associates, and employees who were associated with the Enron Corporation. On behalf of the entire organization, the Enron Corporation’s poor business practices gross standards that pertain to unethical behavior.

The agencies not only discovered the complex web of fictitious partnerships that hid Enron’s massive debt but also that the company’s external accounting firm, Arthur Anderson, was creating materially false and misleading audit reports. . The true nature of Enron’s massive financial losses was shown to the public and the stock price plunged, causing investors to lose billions of dollars. Enron, however, was just the first and largest scandal to become public. Numerous companies including Tyco, WorldCom, and Kmart were found to have inflated earnings (Martin & Combs, 2010, 103). Investors had been manipulated to invest into companies that followed unethical business practice thereby shattering future investor confidence.

In much of the business world from the past to today, we constantly are exposed to unethical behaviors and situations of conflict within the work environment. Thinking critically about a particular dilemma and whether or not it is ethically wrong takes time and critical thinking. The accountants of Enron could have avoided this situation by stepping in and explaining to their superiors the cost of the long-term consequences compared to the short-term benefits was not worth what they were putting out on the line. By analyzing the Enron scandal there will be a greater ability to know information that will help pin point any unethical behavior that an accountants may experience in their own work life. Justin Schultz, a corporate psychologist

The Enron scandal was one of the most notorious bankruptcies of all time. Many people know about the energy titan’s downfall but less realize that it was also one of the biggest auditing blunders in American corporate history, leading to the dissolution of the Arthur Andersen LLP, which at the time was one of the five largest auditing and accountancy partnerships in the world. The most intriguing aspect of this case is that Andersen was eventually cleared by the United States Supreme Court, yet the company still failed to live on due to its tarnished reputation stemming from its unethical behaviors. The pressure to generate revenue for clients while simultaneously auditing their books became too large a burden for the firm and they eventually resorted to unethical means to achieve their objectives. The demise of the Andersen accounting firm shows the true importance of practicing good ethics and maintaining a good reputation amongst peers; the vitality of the business could depend on sustaining a clean image in the ever-changing business world.

Arthur Andersen was once the eighth largest accounting firms in the United States who conducted auditing tax and consulting services to large corporations. Likewise, Arthur Andersen was also responsible for both Enron and Worldcom auditing processes and transactions during the corporate scandals. Prior to the Enron and Worldcom’s scandals, Arthur Andersen was a firm known for its trust, ethics, and integrity (Squires, 2003). In Andersen’s early years, their reputation gave them a competitive advantage in the market which also help them to attract new clients which resulted in continuously high profits. According to Squires (2003), Andersen leaded the way for accounting professions; he believed in putting the interests of the general public

One of the “Big Five” accounting firms, Arthur Andersen, provided top-notch auditing, consulting, and tax service to several clients. Deemed as one of the leaders in the industry, Arthur Andersen services attracted major corporations and individual clients. Slowly, however, Arthur Andersen began to run their services with a greater focus on the clients’ management and performance and less on accounting standards and the investors’ well being. In June 2002, everything changed. Arthur Andersen became the first major accounting firm to be criminally convicted after being in “position as one of the leading professional services firm in the world, with over 85,000 staff in 84 countries and revenues in excess of $9 Billion” (Smith and Quirk 1). The company and its management began to act unethically and irresponsibly with several clients that they had been providing both auditing services and consulting services, a lethal combination. Ultimately, Andersen’s role in the scandals involving large corporations such as Enron, Waste Management, WorldCom, and Sunbeam led to not only these companies’ downfalls, but the

The party with the highest level of contribution to the demise of Enron would have to be their external and internal auditing firm Arthur Anderson. The primary responsibility of any auditing firm is to ensure the accuracy and validity of a company’s financial statements. Investors and stakeholders both internally and externally use this certified information to make critical business decisions. Arthur Anderson willfully partook in the scandals and subsequently went from the largest accounting firm in the world to dissolution in a matter of three years.

The accounting firm was charged both criminally and civilly for many different offenses. For example, “In another Andersen-related case, an Arizona grand jury has re-indicted five men on charges of fraud, racketeering and theft in connection with their involvement in the failed Baptist Foundation of Arizona (BFA)” (Accountant, 2002). The most obvious effect of Arthur Andersen’s unethical behavior and actions is the collapse of several multi-billion dollar corporations. But the effects run far deeper than that.

Elements that Contributed to Enron and AA’s Demise Through Answering two Sets of Case Study Questions (500-750 Words per Case study): (a)=Enron case study questions, and (b)=Arthur Andersen case study questions

The scandal of Enron in 2001 lead the company to the bankruptcy. Enron is the largest bankruptcy reorganization in American history at that time. Undoubtedly, Enron is the biggest example of the audit failure. It is ever the most famous company in the world, but it also is one of companies which fell down too fast. In this paper, it describe the reason why Enron became an admired company in the world, the story of Enron 's rise and fall, the issues of internal and external auditing in Enron, the breaches of accounting and ethics that carried by Enron.

Arthur Andersen and Enron scandal might be the most recognized but not the only one, history have seen many similar accounting failures such as at Satyam Computer Services and Lehman Brothers.

WorldCom acquired Arthur Andersen as the independent external auditing for the company. As WorldCom grew after the merger with MCI, Andersen began to invoice less than they should have. The charges were defended as an opportunity to prolong business with WorldCom. (Kaplan and Kiron, 2007). This is an immediate red flag for a company. Where were the ethical practices of the independent auditor? If the auditor has no ethics, how can one possibly be assured that the company is performing its intended function appropriately? The board of directors should have immediately been informed of Andersen’s practices and made a decision to confront Andersen’s practices and possibly obtain new independent auditors.