Waste Management: Arthur Andersen

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Recommended: Where did the waste management scandal take place

1. What was the fraud?
Founder/ CEO/ Chairman of Waste Management, Dean L. Buntrock with the help of some executives reported $1.7 billion in fake earnings. However, this could not have been accomplished without the assistance of their auditing firm, Arthur Andersen.
2. How was the fraud carried out?
The company allegedly falsely increased the depreciation time length for their assets on the balance sheet. Waste Management was aided in the fraud by the company’s long-time auditor, Arthur Andersen. For five-year their auditors issued unqualified audit reports on the company’s annual statements. From the beginning of it all, the company allowed Arthur Andersen to earn additional fees by performing “special work”. When they discovered the irregularities with their accounting practices it was proposed to management that they correct them. Naturally, Waste Management refused the adjustments and instead entered into arrangements to write off the collected errors over a period of 10 years. This signed agreement was known as the Summary of Action Steps, which laid out the wrongful actions of the two parties and a plan to cover future frauds. …show more content…

The so called “first line of defense” sole purpose is to reinforce the accuracy and assertion of the financial statements. Based on the signed agreement “Summary of Actions”, which detailed a proposed agreement to conceal the fraud, Arthur Andersen was openly aware. They went so far to document it and made arrangements to hide it in the upcoming years. With the addition of the 2002 Sarbanes-Oxley Act I believe these actions could have been prevented. Further, the Act would have held auditors accountable for the accuracy of their reports, which states that an auditor’s “report does not contain any material untrue statements or material omission or be considered misleading” (section 302). Also, by imposing guidelines on fines for fraudulent behavior (Section

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