Arthur Anderson: Questionable Accounting Practices - Research Paper Example

Andesen is required to provide objective and quality services to its clients based on the true expresson of the financial statements of the audited reports. This should have been the case in the waste management and xeron cases, but it failed to happen. As such, Andersen is liable to the picture potrayed to the investors and the money lost due to the aftermath of the cases. The laws a regulation competition applies to the firm as it was undergoing separation of the consulting arm from the audit arm.

As businesses compete unfairly, the resultant legal and social responsibilities issues are brought out as each of the firms fight for their survival. The kind of competition seen between the consulting arm and the audit arm of Andersen was unhealthy and should have been better managed for the two arms to remain intact. May be, just may be, the divorce of the two arms would not have taken place having better managed the competition as well as disclosure of the relevant information. According to Michael, (2006), the Sarbanes act has brought about a complete change in the roles that are playe by th directrs and officers of an audit firm due to the oversight, disclosures and preapprovals of non-audit services by a committee of the auditors.

With this act in place, the management of Andersen would have been different in that the audit and consulting departments would have been under intense scrutiny and reduce the parting ways of the two and formation of Accenture. As well the requirement in the act that CEos and CFOs have to certify the companyy’s annual and quarterly reports would have prevented the misleading figures in financial reports that were observed in the Baptist of Arizona casse tht allowed the foundation to perpetuate fraud and the misleading statements in the waste management case.

The powers and responsibilities that is bestowed on the CEOs and the CFOs place them in a position to enable the audit farms deliver in their mandate of independently approving the financial status of the companies. The act also establishes auditor ndependence and their regulation through the creation of an oversight board. In the waste management case, Andersen is accused in the suit filed of issuing unqualified audit opinions on materially misleading financial statements. The regulation authority would have been able to establish the irregularity way before Andersen got involved in ths case.

Andesen would have been following th regulations of the oversight board and hence would not have offered advise based on misleading statement. Andesen had identified accounting irregularities in the waste management financial reporst and recommended changes in an a report but still went ahead in a closed door agreement to wwrite off the accumulated errors. If this act had been established, the fraudulent activities by the waste anagement and Andersen would not have been swept under the carpet as the act provides that fraudulent activities will have to be punished by the law severly.

The act also gives provision for conflict of interest that might arise between an auditor and analyst independence in the disclosure of a public company’