The Enron Scandal: The Failure of Arthur Anderson and Its Impact on the Accounting Policy - Dissertation Example

Moreover, the project will also ascertain the impacts which are posed in the business environment after the collapse of Arthur Andersen in the global context. There are various reasons or factors which are recognised to be accountable for the closure of the auditing firm. The reasons are related to unethical business practices and criminal offence for acknowledging misleading financial statements and shredding of important evidential documents which in return obstructed the investigations process.

Furthermore, ineffective employment policies, lack of creative leadership and intense competitive environment were responsible for the downfall of the firm. The project also determines that there are various ways in which the collapse of Arthur Andersen had affected or impacted the business world. The project finds out that after the closure of Arthur Andersen, the business entities started to place much emphasis on the aspects of business ethics and social responsibilities. Moreover, organisations are observed to be obtaining effective internal control system.

The auditing policies are also demonstrated to be revised and modified with the intention of mitigating malpractices while preparing financial statements of companies. . Introduction and Background Information 1.1 Introduction Enron Corporation was recognised as an American energy based enterprise which was headquartered in Houston, Texas. Enron was established in the year 1985 and the company was determined to be one of the leading electricity, communications, natural gas, paper and pulp companies worldwide.

The company developed power plant as well as gas lines and it excelled on trading businesses. The revenues of the company amounted to US$9 billion in the year 1995 which rose to in excess of US$100 billion by the year 2000. In the year 2001, an analysis of the financial report was conducted with the intention of ascertaining the five year financial statement. The financial statement depicted that the company was in loss of US$586 million. The company was observed to be in a state of bankruptcy (Li, 2010).

Arthur Andersen LLP was a consulting firm providing accounting, tax and audit services to the large corporate sector which is operating in the United States. Headquarter of the firm was located in Chicago, US. The firm was recognised to be offering risk management services in a quality and high standard manner. In the year 2001, the sakes of the firm amounted to over US$9 billion. There were around 85,000 employees serving the auditing firm in almost 84 countries. The profits of the firm were mainly generated from the payments of corporate clients for providing auditing and consulting services.

The firm was also liable to both the Securities and Exchange Commission (SEC) as well as the public (MacNeil/Lehrer Productions, 2013). Arthur Andersen was responsible for auditing the financial statement of Enron. The firm was operating as an auditor for Enron and also conducted internal audit as well as consulting services. The auditing