A month after the twin towers fell in New York City the nation's focus was shifted to the Enron scandal. Kenneth Lay and Jeffery Skilling were names in the press almost every day. Enron filed bankruptcy and thousands lost their jobs and pensions. Another company involved in the scandal was Arthur Andersen, an accounting firm; Enron was their client. Arthur Andersen continued to perform bad audits even after a warning from SEC. If Arthur Andersen employees had been ethical, after the warning, the Enron Scandal would not have had led to the conviction and dissolution of the Arthur Andersen accounting firm.
Arthur E. Andersen was born in a small town in Illinois and by the age of 16, he was an orphan. He was out in the world on his own. Luckily, his father’s employer was kind enough to allow Andersen to work in the mailroom at Fraser & Chalmers. He attended college courses at night while making his way from the mailroom to the assistant controller position. Andersen joined Price Waterhouse & Co and then took his Certified Public Accounting exam. He also was a professor at Northwestern University. He was very ambitious and according to Susan Squires who wrote Inside Arthur Andersen, “Arthur E. Andersen was an entrepreneur” (28).
People were moving to the cities and leaving their farms behind during the 1910’s. These people needed accountants. “On December 1, 1913, Andersen and Clarence M. DeLany opened a small accounting practice, Andersen, DeLany & Co. Arthur E. Andersen was only 28” (Squires 28). The accounting firm specialized in tax and offered consulting services. In 1915, another office opened in Milwaukee. By 1919, offices were from one end of the United States to another including Kansas City and Houston. Five years after starting the firm DeLany resigned and Andersen renamed the firm Arthur Andersen & Co.
Throughout his lifetime Andersen has known as a stickler for honesty. The book Inside Arthur Andersen states what Andersen and the company lived and worked by:
1. Integrity and honesty—Think straight, talk straight values that ensured the auditor’s duty to protect the public established the firm’s reputation.
2. One Firm, One Voice Partnership Model—A model for unity and cooperation that maintained control of the firm and firm values
3. Training to a Shared Method—A professional development strategy to create a uniform and predictable workforce that could be trusted to do as they were taught. (Squires 38)
After his death in 1947, the company went through fluctuations, but in the late 1970’s there was a lot more competition and the auditing services were not bringing in money. Anderson & Co. needed a service that would bring in revenue, consulting services. This brought the Security and Exchange Commission into the equation. The SEC believed the consulting services were a conflict of interest. A single firm doing both auditing and helping the same company plan its taxes or other services would become a...