Description
The presentation about questionable accounting practices by Arthur Anderson
Arthur Anderson : Questionable Accounting Practices
Early beginning of Arthur Anderson
• Synonymous with trust, integrity and ethics • Undeniable integrity • E.g. depreciation of mainframe computers
Advent of Consultancy
• Started providing consultancy services along with auditing and tax services by 50’s • By 1984, the consulting arm started earning more revenues than accounting services • This was the big challenge for company to remain objective in the long run
Legal issues surrounding Anderson’s auditing practices
• Material misrepresentation by clients overlooked as an auditing firm – Inflated sale prices by BFA – ‘Cookie jar’ revenues by Sunbeam – Overstated earnings by Waste Management – Enron – obstruction of justice trial – Telecom – revenue to capital transactions • All above state cases had big lawsuits against Arthur Anderson and on every single account they found Anderson guilty
Ethical issues with Anderson’s Accounting practices
• Additional fees accepted in the name of consultancy arm • Overlooking mistakes despite warnings by whistle blowers • Blaming clients for misrepresentation • Defending their compromised auditing practices
Corporate culture and downfall
• Revenues were targeted rather than integrity • Inexperience auditors and consultants were sent to inspect clients • Partner’s limited involvement in issuing opinions • Relative dearth of clerks and balances
Sarbanes-Oxley Act
• New accounting oversight borad, stiffer penalties and higher standards in corporate governance • Restricting firms ability to provide auditing and non auditing services • Periodic reviews of audit firms • These provisions will help auditing firms to remain independent – There wont be additional fees – Greater constrictions over deviation • Though the act is good its implementation will actually dictate the effectiveness of the Act
doc_611863564.ppt
The presentation about questionable accounting practices by Arthur Anderson
Arthur Anderson : Questionable Accounting Practices
Early beginning of Arthur Anderson
• Synonymous with trust, integrity and ethics • Undeniable integrity • E.g. depreciation of mainframe computers
Advent of Consultancy
• Started providing consultancy services along with auditing and tax services by 50’s • By 1984, the consulting arm started earning more revenues than accounting services • This was the big challenge for company to remain objective in the long run
Legal issues surrounding Anderson’s auditing practices
• Material misrepresentation by clients overlooked as an auditing firm – Inflated sale prices by BFA – ‘Cookie jar’ revenues by Sunbeam – Overstated earnings by Waste Management – Enron – obstruction of justice trial – Telecom – revenue to capital transactions • All above state cases had big lawsuits against Arthur Anderson and on every single account they found Anderson guilty
Ethical issues with Anderson’s Accounting practices
• Additional fees accepted in the name of consultancy arm • Overlooking mistakes despite warnings by whistle blowers • Blaming clients for misrepresentation • Defending their compromised auditing practices
Corporate culture and downfall
• Revenues were targeted rather than integrity • Inexperience auditors and consultants were sent to inspect clients • Partner’s limited involvement in issuing opinions • Relative dearth of clerks and balances
Sarbanes-Oxley Act
• New accounting oversight borad, stiffer penalties and higher standards in corporate governance • Restricting firms ability to provide auditing and non auditing services • Periodic reviews of audit firms • These provisions will help auditing firms to remain independent – There wont be additional fees – Greater constrictions over deviation • Though the act is good its implementation will actually dictate the effectiveness of the Act
doc_611863564.ppt