Introduction Arthur Andersen was a very hard working individual and created his accounting firm in this image. It was focused on hard working and quality individuals who excelled at their jobs.
Arthur Andersen and Enron: Positive Influence on the Accounting Industry Todd Stinson Arthur Andersen and Enron - two names that will forever live in infamy because of the events leading up to and including the debacle of Decemberwhen Enron filled for bankruptcy.
These two giants in the utility and accounting industries, and known throughout the world, took advantage of not only investors, but also the government and public as a whole, just so that those individuals involved could illegally increase their personal wealth. How could the backlash from the actions of the management of these two organizations have a positive influence in the accounting industry as a whole?
However, this thesis will show how these changes actually are positive for the industry. In order to do this safety measures that were in place at the time of the debacle will be shown, the actual events leading up to the downfall of Enron and Arthur Andersen will be discussed, the changes that have occurred since the fall through the present day will be given, the changes that appear to be on the horizon for the accounting industry will be shown, and finally how all of this will impact the accounting industry as a whole in a positive fashion will be made clear.
Safety Measures in place Prior to the events. Prior to the fall of Enron and their accountants, Arthur Andersen, there were many different types of safety measures in place to help protect the investors and the public as a whole.
The use of GAAP by accountants is standard protocol.
An accountant follows these principles as a matter of daily routine. If they are not, then the business must show why they are not, and present rationale to demonstrate that what they are doing is both ethical and appropriate in their specific situation.
This leaves the field open to interpretations of what is appropriate for different situations. Since interpretations are quite subjective, the American Institute of Certified Public Accountants AICPAadded the stipulation that the treatment must also be applied consistently over time.
These rules are in place to make financial statements as accurate and reliable as possible.
Homework Help rutadeltambor.com It week 6 networking in operating systems checkpoint; Avery clear sticker paper; Air force; Questions and answers on aravali hospital case studies. For most of those years, Arthur Andersen’s name was synonymous with trust, integrity, and ethics. Such values are crucial for a firm charged with independently auditing and confirming the financial statements of public corporations, whose accuracy investors depend on for investment decisions. Ethics Case: Arthur Andersen's Troubles Once the largest professional services firm in the world, and arguably the most respected, Arthur Andersen LLP (AA) has disappeared. The Big 5 accounting firms are now the Big 4.
Enron took these rules and circumvented them to allow certain individuals within the company to make money from the increased investments from stockholders. Since these partnerships were, in most cases, wholly owned subsidiaries or partnerships, they should have been shown on the consolidated financial statements with Enron.
While GAAP guidelines relate to how financial statements are presented, GAAS, on the other hand, are standards set down specifically for the audit cycle of a company. Auditors, according to GAAS, are to remain independent in both fact and appearance. Meaning that even if an auditor appears to have a connection with their client, even though they may not have, they should drop the audit immediately.
They did not execute their duties independently because of the amount of revenue that Enron was providing them, not only in audit fees, but also in consulting fees.
SAS constitute the third important safety measure. These statements on auditing standards are produced to address current issues in the business of auditing. The one that played a predominant role in this incident is SAS This statement also included the duty to find out if any of the management knew of any fraud being committed against the company, and added new fraud terminology to the representation letter produced by management.
This SAS was the first to clearly state that auditors had any responsibility to look for fraud. Up until it was expected that an auditor would report fraud if they happened upon it, but they had no responsibility to actively look for it.
This one SAS along with all the others were supposed to protect the public interest. However, in lieu of the lucrative fees being collected by Andersen from Enron these were also overlooked.
In spite of all of these safety measures the wrongdoings at Enron went undetected for a long period of time.
The major problem was that of collusion. Therefore, when events like these transpire, changes are required in an attempt to prevent similar occurrences.1. Discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted in The provisions of Sarbanes-Oxley Act help minimize the likelihood of auditor failing to identify accounting irregularities by the following requirements: 1).
Andersen’s troubles over Sunbeam Corp.
began when its audits failed to address serious accounting errors that eventually led to a class-action lawsuit by Sunbeam investors . Arthur Andersen Llp Case Study Arthur Andersen LLP 1 Discuss the environmental, strategic, and organizational changes that occurred over the life of Andersen in the context of Figure 2 Evaluate Andersen’s claim that their problems on the Enron audit were due to a .
SUNBEAM Andersen’s troubles over Sunbeam Corp. Andersen was named in the case as having assisted in the fraud by repeatedly issuing unqualified audit opinions on Waste Management’s materially misleading financial statements.
One of the many mistakes that Arthur Andersen did was not train many of its employees about auditing and ethics (Brooks). There should not be one employee who does not know the value of the company and what ethical decisions it should make in order to help the company they are working for%(2).
Andersen’s troubles over Sunbeam Corp. began when its audits failed to address serious accounting errors that eventually led to a class-action lawsuit by Sunbeam investors and the ouster of CEO Albert Dunlap in