Arthur Andersen Case

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In order “to offer high-quality accounting services”, Arthur Andersen (AA), a Northwestern accounting professor started a business to offer services to clients promoting “integrity and sound audit opinions over higher short-run profits”. The company’s “four cornerstones” was good service, quality audits, well-managed staff, and profits for the firm. Their strategy was to focus on quality and high standards of audits rather than profits, a very successful strategy that led to consistent growth over the years.

Environmental, strategic, and organizational changes

In designing the optimal architecture for a given firm, market conditions, technology, and government regulation should be taken into consideration as these are
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This was not the only crisis that AA was involved in which made outsiders questioned their practices and overlook their claim. There were lawsuits against Arthur Andersen. Prior to the Enron scandal AA had settled a dispute with the Securities and Exchange Commission paying more than $7 million for accounting and auditing work of Waste Management Corporation. Additionally, the SEC sued an Andersen lead partner on the Sunbeam Corporation audit.

These crises along with their claim that their problem with the Enron audit was due to a few “bad partners” was merely the result of an unsound organizational structure along with policies and practices that the firm implemented. The unsound organizational structure of Arthur Andersen changed the motivation of employees within the firm and changes within the firm over the years one of which was the compensation of partners did not allow for integrity when work was being done for these public companies.

What could have been done differently? The organizational architecture of Arthur Andersen seemed to have gone a different route from what it was intended for and much of the success that Arthur Andersen was short term and partner based. Policies that were implemented led partners to engage in mischievous acts to gain more business. Slowly their policies and practices became more about money rather than
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