Arthur Andersen after Enron Scandal - Essay Example

Arthur Andersen after Enron Scandal The main purpose of this paper is to analyze the Arthur Company in Chicago looking at its progression and the challenges it faced. Arthur Andersen Company is one of the pioneering firms in the field of accounting founded in the year 1913 by Arthur Andersen, a professor in the Northwestern University, together with his partner, Clarence DeLany. Upon inception, there were six employees and two partners who attended to customers with problems in accounting and the new income taxes that were imposed in the federal state. Andersen opened six other offices in the country with the annual billings rising to 2 million US dollars. Despite the death of its founder, the firm managed to continue expanding. The base of the clients rose to 50,000 from 2,300 in the years 1947-1973 with offices in Chicago increasing to more than 1,500 employees from 250. The late centuries of the twentieth saw, the expansion of the firm internationally creating a division for consultation with management that is fast growing. Arthur Company was regarded as one of the big five companies in the world until the company’s involvement in a criminal case that saw its downfall. The main reason for choosing this company is because, despite the company being involved in various scandals, it managed to rise again after 12 years. The company faced various ethical issues that led to its downfall in 2001. One of them was conducting the illegal audit for Enron Company, the giant company in energy that aimed at covering up billions of dollars that were lost at the energy firm (Titcomb Par. 4). According to the Enron committee, the assessment of the audit that was done revealed that Andersen Company failed to fulfill the responsibilities of its profession regarding the audit the company conducted on the financial statement for Enron. Andersen was therefore convicted for destroying documents that were produced after auditing, which prevented justice according to Enron’s claims. The conviction was however revised later after two managers from Andersen and Enron Company were found to be responsible for ordering the shredding of the relevant documents. This scandal was before Andersen engaged a math of Brickyard with its worker Gagel that to the company was a history though it proved the ability of Andersen to carry out its work with perfection. The brick incidence was whereby a young auditor was sent on a task that was his daily routine to ascertain inventory of bricks million in number that were baking in the sun in Marion. Every time Gagel counted the bricks, he got a number that was less with 100,000 bricks. When he reported at first, the factory owner angrily reacted whenever Gagel approached him and asked him about the existing gap between the required number of bricks and those that he found. He instead transferred the blame to Gagel’s boss by blaming him for sending a rookie person. Gagel’s boss ordered him to recount the bricks once again for the second and third time but still got 900,000 bricks and that was when the brick owner decides to check the discrepancy. After that he realized, that the manager of the plant was the one responsible for stealing the bricks by transporting them using the back gate secretly. This incidence made the name Arthur one of the companies that has the topmost accounting officials for decades but became a history to the company after the Enron saga. The company’s response to the Enron saga included surrendering their license for CPA and their rights to continue practicing SEC in 2002, 31st August. The Company’s action of surrendering their license and rights placed the firm away from business with immediate effect. The winding up process for Arthur had already begun in America after the Company was indicted. The majority of the accountants from Arthur Company left after that incidence and joined other accounting firms. Due to that, the Company sold out its operations in America to other top companies that provided similar services such as, Deloitte and Touche, KPMG, the Thornton Grant LLP and Ernst and Young. These four companies were the most top five including Arthur Company that were known for providing not only professional and adequate auditing services but also tax and other advisory services. Most of the Arthurs operations were however taken by other major accounting firms internationally. The Arthur Company was also involved in another case against the United States that saw the reversion of the company’s conviction in 2002. This was after it was noticed that it had conducted other faulty auditions to other companies that involved management of waste, the foundation of the Baptist for the Arizona among others. According to the view of the court, the instructions given by the two managers from Enron and Arthur were extremely vague to allow the whole company fail to provide justice. The instructions given to the firm indicated that Andersen could still have faced conviction without clear proof that the company knew that it had gone against the law. The auditing company is the ones expected to guard the interests of the public and serve as the secret confessors in the world of finance. They properly know the rules and the way they enforce them defines what is right and what is wrong for the flock in the corporate (Chicago Tribune Par. 20). The opinion from the chief justice was skeptical in the sense that it was an act that persuaded corruption; an act whereby a person is persuaded to engage himself with activities without knowing that they are against the law. The company response of surrendering their CPA license and operating rights contributed to the total downfall of the company. Despite the fact that it Andersen was found with various crimes that that were against the ethics of business, surrendering its license was the worst decision. In one way, the company was not ready to protect its chance to survive in the future. When we consider what is right in the society, the company accepted its mistake though most of them were conducted without the knowledge of the whole management team. The scandals that involved Andersen shows a lack of cooperation in the company, something that is bringing down most businesses in the society. Ignorance is a problem that is seen to have affected Andersen Company. As much as the company was making billions of money, it could be assumed that the management did not focus mush on which companies their employees were conducting audits. Some of the scandals that saw the company into could be for personal gains, for instance, the two managers that from Andersen and Enron could have largely benefited from that activity that led to the downfall of Andersen. In conclusion, no matter how good someone might appear, there is always some faultiness in it. Despite the good name that Andersen held for details, it did not prevent the company from being convicted of involving itself in fraudulent activity. Works Cited James, Titcomb. Arthur Andersen returns 12 years after Enron scandal. The telegraph, 02 Sep 2014. Web. 05 Dec. 2015. . Chicago Tribune. The fall of Andersen. 01 Sep. 2002. Web. 05 Dec. 2015. . Read More