Analysis of Arthur Andersen Accounting Firms - Essay Example

Running Head Arthur Andersen Arthur Andersen Arthur Andersen was one of the well-known accounting firms in the USA> In this company, planning isbased on unique strategic perspective and goals of the accounting profession and future goals of the company. Within Arthur Andersen, the purpose of planning is to provide management with a framework in which decisions can be made which will have an impact on the organization. A conscious effort to systematize the effort and to manage its evolution is preferable to an unmanaged and haphazard evolution. For Arthur Andersen, the basic planning problem is how to allocate the organization's limited resources. The major benefits to be expected from planning include an improved sense of direction for the organization, better performance, increased understanding of the organization and its purpose, earlier awareness of problems, and more effective decisions. Long-range planning is most often an extrapolation of the present. It answers the question of how to get the job done. For example, if you (as a city department head) plan to provide the same services with the same frequency to an expanded city, that is long-range planning (Bateman and Snell 2009). In Arthur Andersen, planning function of management is based on unique strategic goals and competitive pressure, the need to meet customers' needs and preferences. "Once managers have assessed the various goals and plans, they will select the one that is the most appropriate and feasible" (Bateman and Snell 2009, p. 135). The planning function of management is to incorporate mission, vision, objective and goals into a well-thought development plans. For Arthur Andersen, the three basic strategic options are to grow, to remain static, or to shrink. The intent here is not to go into a detailed discussion of their application, but simply to point out the importance of establishing a clear theme of organizational direction and intent. Describing the overall strategy in clear terms is the pragmatic link to organizational objectives. Objectives, in turn, are the specific steps used to execute the defined strategy. Organizational goals are derived from the major categories of problems and opportunities, while objectives are derived from the specific issues that are listed as problems and opportunities. Thus, there will be a much larger number of objectives than organizational goals. Each objective is categorized under the specific goal that it supports. Worthwhile objectives meet certain criteria and are achievable. These conditions may be more stringent than they sound. Many times, too much is taken on in strategic-planning conferences, resulting in unrealistic expectations (Bateman and Snell 2009). Legal issues, ethics and corporate social responsibility have a great impact on planning determining the main directions and framework of future performance. The legal norms and principles are the core of planning process. Similar to other accounting firms, Arthur Andersen pays a special attention to FASB and Codes of ethics. Ethical issues involve fair treatment f all customers and high morale, strict moral principles of the profession and in personal relationships. This description implies that the responsibility of individuals and firms is to identify and respond to market stimuli and to make profits for the shareholders. Any corporate action on social issues is considered to violate management's responsibility to shareholders (Gutman, 2002). As the most outspoken supporter of the fundamentalist position, According to an accepted manifesto of the managerial view, the modern professional manager also regards himself, not as an owner disposing of personal property he sees fit, but as a trustee balancing the interests of many diverse participants and constituents in the enterprise, whose interests sometimes conflict with those of others. What all this implies is that Arthur Andersen's managers have enough discretionary control of corporate resources to consider adding social responsibility considerations in setting the objectives of the corporation. The extent of the involvement in social responsibility is defined mainly by the humanitarian predispositions of its management and is controlled by fears of stockholder dissatisfaction, of losing competitive power, and of adverse effects on earnings. The managerial view is not, however, indifferent to profit maximization (Bateman and Snell 2009). Arthur Andersen pays a special attention to corporate social responsibility issues trying to respond to environmental ethics and risks, industry regulations and norms. The social environment views the large corporation as a repository of huge economic and political power with concomitantly important social responsibilities. "Corporate social responsibility is the obligation towards society assumed by business" (Bateman and Snell 2009, p. 181). The large corporation is believed to have a keen interest in the total societal environment and not merely its markets. It recognizes explicitly the impact not only of economic forces but also of political and social forces. The main problem took place in 2002 when Arthur Andersen was accused in obstruction of justice and unfair accounting practices related to Enron Corporation. For Arthur Andersen, economizing results from the collaboration of the engineer and the economist to determine the best allocation of scarce resources among competing ends. Economizing is basically concerned with reaching a level of efficiency in the use of resources. It relies on engineering for designing the machines and determining the optimal way to use these machines in order to produce a maximum output within a given physical layout (Moore and Crampton n.d.). Arthur Andersen planning systems is based on four main types of planning: contingency, strategic, tactical and operations planning. Competition is the most important external factor which influences the four planning types. Competition determines the short-term direction of the corporation and its long-term goals, possible risks and threats, responses to market changes and new conditions. While strategy is practiced from afar, tactics make up the here and now within the working levels of the organization. This is where planning moves into the trenches--pinpointing the details of individual steps to accomplish the objective and specifying their undertaking in terms of whom, during what time frame, and with what expected result. At this point in the strategic-planning process, enough information to develop a strategic-planning document exists. This document communicates the organization's vision to its people. An organization will work properly if the people inside it understand and become committed to the aims and ambitions of the whole business. The second factor is inflation and economic conditions: prices and inflation. Contingency, strategic, tactical and operations planning are influenced by this factor and are determined by economic changes. Depending on the size and complexity of an organization, two levels of strategic planning are possible: (1) overall organizational strategic planning or (2) functional/departmental/ strategic planning. Functional strategic plans deal with what to do to operate a specific organizational component in a specific overall organization. Issues like technology and service changes, location of new facilities, and expanded services to newly annexed areas are examples. Overall organization strategic planning is conducted at the next higher level and is concerned with the overall organization. Issues like new services, consolidations, joint agreements, and major reorganizations of departments are examples. These include the macroenvironmnent (e.g., economic trends, inflation, changes in citizen needs, changing demographics, etc.), the government environment (especially changing federalism and state government trends), the competitive environment (the present and potential competition, particularly as related to economic development), the citizen environment (what the service user says), and the organization's internal environment (e.g., is there antiquated technology, high turnover, many people planning to retire soon). These areas should be surveyed in depth (Bateman and Snell 2009). The third factor is changing demands. Organizations need to be aware of what is happening in their environment that might affect them. In other words, they should continually survey and monitor the outside as well as the inside of the organization. This is especially true during the strategic planning process. Demands conditions determine strategic direction of the company and requires special contingency plans to avoid a market failure. Environmental scanning will also identify a variety of factors (Bateman and Snell 2009). both internal and external to the organization, to be considered as part of the strategic planning process. In fact, one of the benefits of strategic planning is that an organization will gain a better understanding of how environmental scanning should be done and be able to manage more effectively as a result. Factors to be considered include social factors such as demographics, financial factors such as interest rates, and political factors such as increasing government deregulation, changing federalism and state government's trends, and regulations. References Bateman, Th. & Snell, S. (2009). Management: Leading and Collaborating in a Competitive World Retrieved from https://ecampus.phoenix.edu/content/eBookLibrary/content/eReader.h. Gutman, H. (2002). Dishonesty, Greed and Hypocrisy in Corporate America. Retrieved from http://www.commondreams.org/views02/0712-02.htm Moore, M., Crampton, J. (n.d.). ARTHUR ANDERSEN:CHALLENGING THE STATUS QUO. Retrieved from http://www.anbhf.org/pdf/moore_crampton.pdf Read More