Andersen V. Arthur Andersen

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Recommended: Distinguish between ethics and professionalism

The second general standard of generally accepted auditing standards (GAAS) is, “In all matters relating to the audit, an independence in mental attitude is to be maintained by the auditor or auditors.” The facts of the case reveal numerous issues that suggest that Andersen's independence may have been compromised. For example, Enron was one of Andersen’s biggest audit clients. It paid Arthur Andersen $7.8 million in fees for auditing the financial statements, $6.6 million for other audits required by law in other countries, and lastly $50 million for consulting, litigation support, and tax services. More than half of the fees for Enron were charged for non-audit services. The size of the fees would likely have made it hard for auditors of Andersen to challenge Enron's management team on difficult accounting issues. Nonetheless, this is one of the numerous issues that suggested that Andersen’s independence may have been compromised. …show more content…

Andersen even said that they viewed their relationship as a “long-term partnership” as well as considering itself as a committed member of WorldCom’s team. Being independent means that the relationship with or service provided by the auditor cannot place them in a position of being an advocate for the audit client. As soon as Andersen performs non-audit work and considers themselves part of WorldCom’s team they become advocates for WorldCom and results in their acting as management or employee for their audit client, especially when Andersen explained that they would help WorldCom improve its business operations and grow in the

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