Arthur Andersen Case Study

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Arthur Andersen, established in 1913 became one of the most coveted and prestigious accounting firms in the world and a part of the “Big Five”. Despite this success, Arthur Anderson was also a part of one of the largest fraud scandals in history. After the original Arthur Anderson passed away in 1947, Leonard Spacek became the managing partner and eventually convinced the rest of the partners to stay together despite possible uncertainties with the company moving forward financially. After the forming Arthur Andersen in 1989, the company’s corporate culture began to change with the new management that had been set forth. With more and more competition coming into the market, Arthur Andersen decided that the only way they will be able to keep up with competition is through fraud and ethical misconduct.
Once Andersen’s counterpart, Andersen’s Consulting eclipsed Arthur Andersen, the firm decided to take action and create new strategies to cutting costs and inflating revenues. Another policy action put in place required partners to retire from the company at 56 years of age. This ultimately led to the hiring of younger adults (usually coming right out of college) who are inexperienced and not quite ready to take on the demands of being an auditor.
Two of the first major wrong steps Arthur Andersen dealt with was Boston Chicken and Waste Management. In the case of Boston Chicken, a fifty dollar audit fee was turned into a three million dollar service engagement.

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