Andersen V. Arthur Andersen

546 Words2 Pages
bulb-icon

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

Show More
Related

  • Dr. Harold Glucksberg vs. The State of Washington

    965 Words  | 2 Pages

    'Choosing death before dishonor is seen by some philosophers and ethicists as a rational reason to commit suicide.' In the 1994 case of Glucksberg v. Washington (Otherwise acknowledged as Compassion In Dying v. The State Of Washington), Harold Glucksberg, alongside the right-to-die organization Compassion In Dying, filed a suit in opposition to the state of Washington for three fatally ill patients he treated.

    Read More

  • Gibbons V. Ogden (1824)

    969 Words  | 2 Pages

    In America’s time there have been many great men who have spent their lives creating this great country. Men such as George Washington, John Adams, and Thomas Jefferson fit these roles. They are deemed America’s “founding fathers” and laid the support for the most powerful country in history. However, one more man deserves his name to be etched into this list. His name was John Marshall, who decided case after case during his role as Chief Justice that has left an everlasting mark on today’s judiciary, and even society itself. Through Cases such as Marbury v. Madison (1803) and McCulloch v. Maryland (1819) he established the Judicial Branch as an independent power. One case in particular, named Gibbons v. Ogden (1824), displayed his intuitive ability to maintain a balance of power, suppress rising sectionalism, and unite the states under the Federal Government.

    Read More

  • Alice Paul v. Carrie Chapman Catt

    583 Words  | 2 Pages

    “Even in the modern day world, women struggle against discriminatory stigmas based on their sex. However, the beginnings of the feminist movement in the early 20th century set in motion the lasting and continuing expansion of women's rights” (Open Websites). One such organization that pushed for women’s rights was the National American Women Suffrage Association (NAWSA) established in 1890. The NAWSA was the largest suffrage organization and worked toward securing the right to vote. The NAWSA however was split into two, the NAWSA and the National Women’s Party (NWP), when suffragists were disagreeing on how to achieve their goal.

    Read More

  • The Andersonville Trial

    1251 Words  | 3 Pages

    “…and on the charge that the prisoner did with others to conspire to destroy the lives of soldiers in the military service of the United States in violation of the laws and customs of war-Guilty” were the words that soared out of Wallace’s mouth at the end of the trial. It was then that Henry Wirz was found guilty. Why? Why was he found guilty? This decision was based on the emotional aspect of the witnesses, and not by the actual guilt. Not only my defense, but also the defense of Wirz’s attorney, Baker, the testimony of the defendant, Henry Wirz, shows that Wirz should not have been found guilty.

    Read More

  • Enron's Fall: An Examination of Corporate Ethics

    877 Words  | 2 Pages

    Take into consideration the auditors from Arthur Andersen. They did not take into consideration the greatest good for the greatest number of people. The auditors from Arthur Andersen took into consideration the consequences only for their own firm and their own well-being. Vinson & Elkins lawyers should not have destroyed evidence in order to protect their client Enron. Lawyers do take an oath to help protect and defend their client but they are not to help find ways for their client to violate the

    Read More

  • Accounting Fraud, the Investor and the Sarbanes Oxley Act

    1981 Words  | 4 Pages

    Throughout the past several years major corporate scandals have rocked the economy and hurt investor confidence. The largest bankruptcies in history have resulted from greedy executives that “cook the books” to gain the numbers they want. These scandals typically involve complex methods for misusing or misdirecting funds, overstating revenues, understating expenses, overstating the value of assets or underreporting of liabilities, sometimes with the cooperation of officials in other corporations (Medura 1-3). In response to the increasing number of scandals the US government amended the Sarbanes Oxley act of 2002 to mitigate these problems. Sarbanes Oxley has extensive regulations that hold the CEO and top executives responsible for the numbers they report but problems still occur. To ensure proper accounting standards have been used Sarbanes Oxley also requires that public companies be audited by accounting firms (Livingstone). The problem is that the accounting firms are also public companies that also have to look after their bottom line while still remaining objective with the corporations they audit. When an accounting firm is hired the company that hired them has the power in the relationship. When the company has the power they can bully the firm into doing what they tell them to do. The accounting firm then loses its objectivity and independence making their job ineffective and not accomplishing their goal of honest accounting (Gerard). Their have been 379 convictions of fraud to date, and 3 to 6 new cases opening per month. The problem has clearly not been solved (Ulinski).

    Read More

  • The Power Of Power For Paradigm Toys

    1761 Words  | 4 Pages

    A third party company will perform this audit that has no interest in the company to verify that they are operating in an ethical manner.

    Read More

  • Accounting Case Study: The AICPA Code Of Professional Conduct

    900 Words  | 2 Pages

    The independence of mind or independence in fact means Betty has to have a state of mind that allow her to form an opinion without bias due to influence that compromises professional judgment. By having an independence of mind allowing an individual to perform his or her audit work with integrity, as well as, maintaining her objectivity and professional skepticism behavior. However, in this case, she did not have an independence of mind since she trusted Toby and she enjoyed working with him since he is also a CPA because it is easy for her to work with him compare to her other clients who do not have the accounting background. As a result, because of long-term relationship and trust that Betty has with Toby, it influenced her decision about the audit opinion. Additionally, to be independent in appearance Betty and her audit team must show unbiased professional judgment when she reviews her clients ' financial statements. Betty had Problems with independence in appearance because in the case study shown me that she has become too close to her client, Toby. Therefore, all auditors have to maintain their professional skepticism as well as maintain independence in their mental attitude and also independence in appearance to provide an unbiased opinion on

    Read More

  • Worldcom Case Study

    1575 Words  | 4 Pages

    The auditors were more concerned with keeping the WorldCom account and should have been unbiased and independent in their decisions. Andersen even undercharged WorldCom as he looked at is as a bond in their long term relationship. Andersen’s “more efficient” method of auditing after WorldCom’s operation expansion skipped detailed individual transactions for

    Read More

  • Why Are Ethics Important In The Accounting Profession

    1384 Words  | 3 Pages

    In the predicament of David Duncan, the lead audit partner at Arthur Anderson the Accounting Firm for Enron, underscores the penalty that accountants may face under professional accountability. Duncan had pleaded guilty to obstruction of justice when he was involved in the connection with document shredding.

    Read More

  • Summary Of Archibald Lampman Vs. Carnerry

    1048 Words  | 3 Pages

    Archibald Lampman and H.D Carnerry are both well-established poets of their time. Lampman and Carnerry both describe areas known to them and evoke feelings inside of them. Lampman wrote about northern landscapes that evoked emotion inside him, on the other hand Carnerry wrote about Jamaica. While Archibald Lampman’s “A January Morning” and H.D Carberry both express the effect of seasons on an area, Lampman’s poem adheres more closely a conventional structure of poetry which aids in the understanding of the poem, in contrast to Carberry, who used an unconventional methods as well as contrary areas and seasons.

    Read More

  • Characteristics Of The Audit Quality Of An Auditor

    1136 Words  | 3 Pages

    This caused a major investigation on regulations by the United States to ensure this kind of event will never happen again. This shows that although audit as a profession has existed for a long period of time, it is not yet perfect at preventing such events from occurring which shows that it needs to be continually improving in order to succeed. Agency theory is also integral to the audit profession as in many cases, auditing is conducted to ensure the agent (organisation) is acting in the principals (stakeholders) best interests instead of prioritising their self-interest which in most cases would be profits at the expense of shareholders (Eisenhardt,

    Read More

  • Essay On The Enron Corporation Scandal

    2377 Words  | 5 Pages

    Corporate governance changed drastically after the case of Andersen Auditors, Enron’s auditing service showed that they contributed to the scandal. Andersen was originally founded in 1913, and by taking tough stands against clients, quickly gained a national reputation as a reliable keeper of the people’s trust (Beasley, 2003). Andersen provided auditing statements with a ‘clean’ approval stamp from 1997 to 2001, but was found guilty of obstructing justice by shredding evidence relating to the Enron scandal on the 15th June 2002. It agrees to cease auditing public companies by 31 August (BBC News, 2002).

    Read More

  • What Are The Ethical Issues In Enron

    874 Words  | 2 Pages

    Enron was on the of the most successful and innovative companies throughout the 1990s. In October of 2001, Enron admitted that its income had been vastly overstated; and its equity value was actually a couple of billion dollars less than was stated on its income statement (The Fall of Enron, 2016). Enron was forced to declare bankruptcy on December 2, 2001. The primary reasons behind the scandal at Enron was the negligence of Enron’s auditing group Arthur Andersen who helped the company to continually perpetrate the fraud (The Fall of Enron, 2016). The Enron collapse had a huge effect on present accounting regulations and rules.

    Read More

  • The History of Auditing

    3399 Words  | 7 Pages

    The evolution of auditing is a complicated history that has always been changing through historical events. Auditing always changed to meet the needs of the business environment of that day. Auditing has been around since the beginning of human civilization, focusing mainly, at first, on finding efraud. As the United States grew, the business world grew, and auditing began to play more important roles. In the late 1800’s and early 1900’s, people began to invest money into large corporations. The Stock Market crash of 1929 and various scandals made auditors realize that their roles in society were very important. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. The auditors’ job became more difficult as the accounting principles changed, and became easier with the use of internal controls. These controls introduced the need for testing; not an in-depth detailed audit. Auditing jobs would have to change to meet the changing business world. The invention of computers impacted the auditors’ world by making their job at times easier and at times making their job more difficult. Finally, the auditors’ job of certifying and testing companies’ financial statements is the backbone of the business world.

    Read More

More about Andersen V. Arthur Andersen

Open Document