Arthur Anderson: Questionable Accounting Practices

Assignment 3: “Arthur Anderson: Questionable Accounting Practices”

HRM 522 Business Ethics

August 12, 2012

Abstract

The following paper will discuss the rise and fall of the infamous accounting firm, Arthur Andersen. We will discuss the lethal mistakes that brought down the nearly ninety year old firm. The following four questions will be the basis of our research; (1) Review the mandated requirements for legal compliance (from Chapter 4) and determine which requirements apply to the Arthur Anderson case. Explain your rationale. (2) Discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted in 1999. (3) Determine and discuss which elements of the framework for ethical decision making in business (from Chapter 5) played the biggest role in the Anderson case. Explain your reasoning.. (4) Discuss how the situations at Arthur Anderson may have played out differently if their senior management had displayed the habits of strong ethical leaders. Provide specific examples to support your response. Upon answering these questions, we will discover that there were neither checks nor balances in their auditing process, causing an industry wide change in laws and procedures.

Key terms: Arthur Andersen, ethics, Sarbanes-Oxley Act, consumer, protection

Review the mandated requirements for legal compliance (from chapter 4) and determine which requirements apply to the Arthur Anderson case.

Upon reading chapter 4, there are five categories that separate the mandated requirements for legal compliance, and two directly apply to the Arthur Anderson case. The requirements that pertain to the Arthur Anderson case include (1) protection of consumers, and (2) incentives to encourage organizational compliance programs. The text gives examples stating that it is all about making sure that people were not taken advantage of as a result of an entity’s business practices. The mandated requirement, incentives to encourage organizational compliance programs, speaks directly to the Arthur Anderson case. Our book, entitled “Business Ethics: Ethical Decision Making and Cases”, states that; Gatekeepers such as lawyers, financial rating agencies and even financial reporting services must have high ethical standards.” This statement stresses that high ethical standards do not just happen they are enforced. Without compliance programs, creates ways for people to do dishonest things (Ferrel, Fraedrich & Ferrel, 2011).

Discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted