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Managerial Economics and Organizational Architecture-ARTHUR ANDERSEN LLP - Case Study Example

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In 1930s, due to the change in regulatory measures that required companies submission of their financial statements annually, Andersen’ firm was effective in “promoting its good service, quality audits, well managed staff, and profit for the firm”…
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Managerial Economics and Organizational Architecture-ARTHUR ANDERSEN LLP
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Download file to see previous pages Thereafter, around the 1980s, Arthur’s firm changed its outlook by installing wooden doors in all its offices, while the firm trained its employees on thinking straight, as well as talking straight. The management also gave the right of decision making to the central office’s professional standard group, with an aim to quality and firm opinions in the organization. Technologically, an engineer in Andersen’s firm came up with the idea of computers use in bookkeeping, hence proving to be efficient while automating their client’s accounting systems. This led to the rise of a computer consulting business, which provided services to other firms and yielded much more revenue compared to the auditing. Due to the conflicting factors of the consultants feeling underpaid and leaving the firm, Andersen separated the consulting and auditing business and decided to form Andersen worldwide (AW). This consisted of Andersen consulting that focused on consulting services via use of computer systems and Arthur Anderson (AA), which focused on audit and tax business (Capstone case study pp 555) Due to stiff competition, the firm made some organizational changes; first, it decided to cut on it costs by ensuring that its employees retired at the age of 56 year, thus yielding more revenue that benefited the partners. New partners emerged such as Steve Samek who headed the Boston chicken audit, and Robert Allgyer who excelled in waste management that generated $17. 8 million. With Samek becoming the managing partner at AA, he introduced the 2X performance evaluation that required partners to yield twice as much from auditing and non-auditing services, and those who met this target would be rewarded. The dress code changed and the wooden doors that had been installed were removed, and a new logo “the rising sun” was adopted. New services were offered such as concentrating on the bookkeeping and offering internal audits (capstone, 557). Evaluate Andersen's claim that their problems on the Enron audit were due to a few "bad partners" in the organization. If you disagree with this claim, discuss what you think were the root causes of the problem. As one staff suggested, “there were too many people in the Houston office, with their fingers on Enron’s pie” (capstone, 55), which is true as the auditor present chose to ignore the problems that faced Enron. Andersen firm was competent and it should not have blamed anybody for the decisions it made such as shredding documents so as to hide fraud practices at Enron. Anderson should have taken the blame himself, as he was responsible for his employees’ ethics other than firing David Duncan. In addition, the problem could have arisen from incompetent staff, questionable accounting practices, bad management, and poor internal controls. Suppose you were Andersen's managing partner in the early 1990’s. Would you have done anything differently than the actual management (assuming you knew only what they did at the time)? First, I would have only hired a substantial number of auditors to work with and ensure that they were competent enough. Secondly, my management would not have advised Enron to declare itself bankrupt at that crucial time, as many investors would be affected. The questionable accounting practices at Enron that Andersen signed off should have been brought to light, so as to determine the root cause of the problem. Moreover, effective management, quality ...Download file to see next pagesRead More
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