Arthur Andersen

ARTHUR ANDERSEN LLP CASE STUDY DUE: Sunday, May 12, 11:59pm 1. Discuss the environment, strategic, and organizational changes that occurred over the life of Andersen in the context of figure 11. 1. 2. 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. 3. Suppose you were Andersen’s managing partner in the early 1990s.

Would you have done anything differently than the actual management (assuming you knew only what they did at time)? 4. Discuss the relationship between what happened at Andersen and multitask principles agent theory. 5. Discuss the relation between the “hard” and “soft” elements of a firm’s corporate culture in the context of this case. 6. Do you think that the problems at Andersen were unique to them or did they exist at the other big accounting firms?

Suppose you were top partner at one of the major accounting firms at that time of Andersen’s demise. What actions, if any, would you take in response? Explain. 7. In 2000, the SEC proposed new regulations that would limit consulting work by accounting firms. This proposal was not passed by Congress. Do you think that the legislators were trying to act in the public interest when they failed to pass this proposal? Explain. 8.

The American Institute of Certified Public Accountants is the primary professional association for certified public accountants. It has developed a Code of professional conduct that sets standards of conduct for CPAs. People can file complaints about ethical conduct of a CPA with the AICPA, which can levy sanction and other penalties against its members. Do you think the unethical conduct at Andersen (and possibly other accounting firms) was the fault of the AICA for not setting and enforcing higher ethical standards among its members?

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Explain. 9. The Sarbanes-Oxley Act of 2002 established a new five –person board to oversee financial accounting in publicly traded corporations. The board is appointed by the Securities and Exchanges Commission. Prior to the creation of this board the industry relied primarily on self-regulation through the American Institute of Certified Public Accountants. Do you think the establishment of the new oversight board was a good idea or should the profession have continued to be self-regulated?

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