Reference no: EM131486032

Case Study - Arthur Andersen's Troubles

Questions

1. What did Arthur Andersen contribute to the Enron disaster?

2. Which Arthur Andersen decisions were faulty?

3. What was the prime motivation behind the decisions of Arthur Andersen's audit partners on the Enron, WorldCom, Waste Management, and Sunbeam au-dits: the public interest or something else? Cite examples that reveal this motivation.

4. Why should an auditor make decisions in the public interest rather than in the interest of management or current shareholders?

5. Why didn't the Arthur Andersen partners responsible for quality control stop the flawed decisions of the audit partners?

6. Should all of Arthur Andersen have suffered for the actions or inactions of fewer than 100 people? Which of Arthur Andersen's personnel should have been prosecuted?

7. Under what circumstances should audit firms shred or destroy audit working papers?

8. Lingering Questions

Within a few months, arrangements had been made for the AA units around the world to join other firms, but not before many staff had left, and not all those remaining were hired by the new employers. A firm of 85,000 people worldwide, including 24,000 in the United States, was virtually gone.

Was this an appropriate outcome? Perhaps only 100 AA people were responsible for the Enron tragedy, but 85,000 paid a price. Will the reduced selection of large accounting firms, the Big 4, be able to serve the public interest better than the Big 5?

What if another Big 4 firm has difficulty. Will we have the Big 3, or are we now facing the Final Four?

Will fate await other individual AA partners and personnel beyond David Duncan, or by the AICPA through the exercise of its code of conduct? Will a similar tragedy occur again?