With a conflict of interest
Needs to be set straight
Arthur Andersen was a major accounting firm that had clients worldwide. One of their biggest clients was Enron. Turns out this would also be the client who would ultimately lead to the end of Arthur Andersen’s firm. I read an article about Arthur Andersen going out of business and how large a part that Enron had in this. Prior to 2002, Arthur Andersen was known as one of the “Top-Five” accounting firms. These firms included PwC, Deloitte, Ernst & Young, KPMG, and Arthur Andersen. But, in 2002, it dropped from these ranks in only 9 months. Of the 28,000 employees that were formerly at Arthur Andersen fewer than 3000 remain and no public-company audits remain.
This was due to the conflict of interests that Arthur Andersen went through as the independent auditor for Enron. As read in the Enron case study the auditors had offices in the Enron building and were basically considered employees of Enron. This is a major conflict of interest for a CPA. Their job is to be objective and be completely unbiased when auditing a company. With the conflict of interest occurring, this was an impossible task. In addition to this, Arthur Andersen then went on to destroy documents related to Enron when the investigation began. This clearly shows how badly the conflict of interest really was.
I will take a deotological approach into what Arthur Andersen should have done and what decisions should have been made. I will explore how they could have given an unbiased audit and in turn kept their public auditing practice. This will also lead an overall issue of independent auditing which I can use for the white paper.