In any business, the major battleground is financial accounting, and there is no government or industry regulation that can prevent unethical ways that people use in dishonestly reporting given financial information (Duska, 2007). For example, there are certain accounting practices that are illegal like misinterpretation of figures and expenses on a company’s financial statement. However, some legal accounting practices are unethical (for example, influencing financial results by shifting expenses unjustifiably).
Arthur Andersen LLP is a good example of a company that violated accounting ethics. This accounting firm would have become one of the largest firms in the USA because it was as a symbol of integrity, trust and ethic. This came from was derived from the advent of business consultation, developed by Leonard Spack (Moore & Crampton, 2000). There was a growth in consulting services and most companies viewed it as a model for successful emulation. This resulted to a sharp increase in competition pressure where Andersen was unable to withstand the pressure. This negatively affected the corporate culture of Andersen, enabling it to focus more on its revenue growth by use of illegal and unethical misconducts such as fraud and accounting irregularities.
There were two aspects in Andersen’s case; one was due to conflict of interest that was present between auditing and consulting business. It is obvious that the company ignored audit confused by the huge profits that consulting services brought (Duska, 2007). Secondly, Andersen lacked independence, and its trouble started to rise when it opted not to make correct ethical decisions but rather found that making money was a priority. Its side deals with companies allowed such companies to have much higher revenues than expected due to fraudulent accounting practices that they got away with (Moore & Crampton, 2000).
Arthur Andersen leaders, unfortunately, failed to recognize that politicians, the public and SEC was angry about its audit failures because if they had recognized the problems earlier, the flaw would have been corrected in its internal control that allowed for audit failures in the affected companies (Moore & Crampton, 2000). These practices eventually caught up with the company as corporate client’s faced lawsuit slews and companies restating their records, which resulted to companies incurring losses in hundreds of millions.
Andersen ethical violation actions did not go without consequences as it led to thousands of employees losing their jobs. Their actions affected companies such as WorldCom, Enron, Baptist Foundation of Arizona, Sunbeam Products, Asia Pulp & Paper and Waste Management among others (Moore & Crampton, 2000). The firm had to surrender licenses of practicing in the United States as Certified Public Accountants following criminal charges against it in the way it handled Enron auditing, a Texas based Energy Corporation that had in 2001 filed for bankruptcy and later failed. Most of the Arthur Andersen practices came out after scrutiny by other national consulting and accounting firms.
United States Supreme Court overturned the verdict later, but the damage brought by the ethical violation had hindered it from getting back as a viable business. In addition, there are more than one hundred pending lawsuits filed by corporate clients against the firm. Currently, the firm is down to almost 200 employees from 85,000 worldwide and 28,000 in US (Moore & Crampton, 2000). Most of the attention is on orderly dissolution of the company and handling lawsuits. Most of its partners merged with other firms or formed new companies such as Huron Consulting, Perot Systems, and True Partner Consulting among others.
References
Duska, R. (2007). Contemporary Reflections on Business Ethics. Boston: Springer.
Moore, M. V., & Crampton, J. (2000). Arthur Andersen: Challenging the Status Quo. The
