Organizational Structure Of Arthur Andersen

An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002

Proper conduct and ethical behavior are important, because auditors are party to confidential information and it is important this trust not be abused. This essay discusses the purpose of the American Institute of Certified Public Accountants (AICPA) and delves into the definitions of the six principles of the Code. It explores to whom this Code applies and what should be considered its key principle. The next

The architectural design of a firm varies greatly. In 1950, the business environment of Arthur Andersen included using the computer effectively for automated bookkeeping. Structure and regulation of the markets, helped Arthur Andersen to develop into a well-respected and reputable auditing company. The federal law in the 1930s requiring companies to turn over their financial statements yearly to an independent auditor not only strengthened Arthur Andersen, but also helped with their impeccable reputation. Arthur Andersen’s strategy included quality audits with a well-managed staff and profits. Promotions and rewards were plentiful when auditors made sound auditing decisions. In the 1990s, Arthur Andersen’s organizational architecture and strategy focused on generating new business, cost cutting, and performance evaluations along with decision rights over its business (Brickley, Smith, & Zimmerman, 2009).

At the end of the last century, accountants began to organize and become a profession as state societies and boards of accounting debuted. At that time a few companies began to issue financial statements; however, there were no established standards, codes of ethics, or generally accepted principles. Practitioners wishing to represent the economic reality of an entity had to rely on professional judgement. Over time, the profession evolved so that committiees emerged to address these issues, and practitioners voluntarily abided by their guidance.

The Model of Trust Enhancement was established to enhance and maintain the public’s trust in the accounting profession. Over the last two decades, the ethics of the accounting profession has been questioned and public trust destabilized, in particular for auditors, due to the Enron debacle. The fact that an auditing firm would assist their clients with publishing an inadequate set of financial statements shows their willingness to violate laws and regulations (Sims & Brinkmann, 2003). According to the textbook, “Because trust is essential, even the appearance of an accountant’s honesty and integrity is important. The auditor, therefore, must not only be trustworthy, but he or she must also appear trustworthy” (Duska, Duska & Ragatz, 2011, p. 116). The majority of statements filed inadequately have a substantial impact on the credibility of the accounting profession as a whole. Sullivan (n.d.10) states that a CPA must possess a high level of trust, by applying professional judgment and enhancing the three trustworthy characteristics (ability, benevolence, and integrity) when resolving accounting ethics dilemmas (slide 3).

One great problem that has been realized to have entered into the accounting industry is that a lot of accounting firms only give help to their clients whenever they feel so. Unfortunately, this has far much bigger negative results to businesses. A lot of the businesses go through a stressful experience and sometimes it is adverse. We have a great understanding that our clients choose us because of our great effort to ensure that we help them most when in need.

Ethics in any industry is important, but for Accounting professionals and those in need of their services, it is a particularly stressed element. Information provided by accountants is used to make major decisions, including investing, downsizing, expanding, etc, so accountants are expected to be competent, reliable, and have a high degree of professional integrity. Because of these high expectations, the professional accountancy industry, like many other professions, has adopted professional codes of ethics (Woelfel, 1986). These ethical codes go above and beyond the requirements for state or federal laws and regulations. There are several professional organizations within the

Businesses, investors, creditors rely on accounting ethics. The accounting profession requires honesty, consistency with industry standards, and compliance with laws and regulations. The ethics increase the responsibility and integrity of accounting professionals, and public trust. The ethical requirements influence the management behavior and decision-making. The financial scandal of Enron and Arthur Anderson demonstrates the failure of fundamental ethical framework, such as off-balance sheet transactions, misrepresentation of financial statements, inaccurate disclosure, manipulations with earnings, etc. The confronted accounting profession and concern for ethics in businesses forced regulators to revise the conceptual framework of accounting processes.

In 1913, the company Arthur Andersen started by Arthur Andersen and Clarence Delany by the name of Andersen, Delany, & Co. In 1918, it was given the name Arthur Andersen & Co. The company supplied tax, consulting services and auditing for the large business, and itself had a position in the "Big Five" accounting firms. In 2002, this firm was found guilty for auditing an energy corporation, Enron and it surrendered back its rights of auditing. This led to Enron 's bankruptcy and loss of 85,000 jobs.

In the accounting world, one’s qualifications, expertise, and reputations are extremely important aspects and should all be taken into consideration when choosing a firm.

Andersen was once a thriving global institution that focused on providing accounting services to public companies. Before its solvency, Andersen was attributed to significant changes in the accounting industry as it introduced automation in accounting services including other achievements (Sellers, Fogarty, & Parker, 2012). From a business environmental perspective, Andersen began as an accounting firm in 1914 which later expanded to providing consultancy and auditing services. Moreover, a technological aspect (as mentioned above) of accounting was introduced in 1950s that contributed to the significant changes that the firm encountered.

What draws me into the field of accountancy? Why do I want to launch a career as a certified public accountant (CPA)? What is there about numbers, spreadsheets, profit and loss statements, audits, inventory and fiduciary responsibility that appeal me? In this paper I will describe in detail the reasons why I am attracted to this field. Also, what are the duties and responsibilities of a CPA? How available are job openings for a person with the education and experience to work as a CPA? How well to companies compensate those hired as CPAs? These questions and issues will be thoroughly reviewed in this paper.

Enron and Arthur Anderson were both giants in their own industry. Enron, a Texas based company in the energy trading business, was expanding rapidly in both domestic and global markets. Arthur Anderson, LLC. (Anderson), based out of Chicago, was well established as one of the big five accounting firms. But the means by which they achieved this status became questionable and eventually contributed to their demise. Enron used what if often referred to as “creative” accounting methods, this resulted in them posting record breaking earnings. Anderson, who earned substantial audit and consultation fees from Enron, failed to comply with the auditing standards required in their line of work. Investigations and reports have resulted in finger

In term of total audit fee dollars, PwC maintains its leadership position among the Big 4 (Appendix A, table 1), followed by Deloitte, Ernst & Young and KPMG. In 2014, PwC generated $15 billion from its audit service – 44% more than those earned by KPMG. PwC also ranked as the most prestigious accounting firm (Appendix A, table 2) in 2015 according to the Vault’s annual Accounting Survey as reported in table 2, followed by Ernst & Young, Deloitte and KPMG. Following qualitative responses are also taken during the Vault’s survey to describe their perception of firms other than their own: “Most prestigious of the Big 4” “Very aggressive firm but over-promises in the marketplace” “Doesn’t seem to care about audit anymore” “Overworking employees beyond every other firm” “Not a good work/life balance” “Big 3’s kid brother” “Least prestigious of the Big 4”. These responses indicate potential variations within the Big 4 firms based on the outside perception of a firm.

The case of Enron Corporation and Andersen, LLP can be noted as one of the most infamous fraud scandals in US history. Investors lost millions of dollars and ruined the public’s trust. Enron was once the seventh largest public company in the United States and Andersen LLP was the world’s largest and most respected business organizations. Enron’s stock prices soared to approximately $100 to less than $10 in 2001. How did these two big giants fall into oblivion and what could have been done to avoid the disaster of these companies?