Introduction
This essay shall be taking up the case study of Arthur Anderson, the accounting major, who was adversely affected due to fraudulent practices and the subsequent closure of Enron, the public energy company.
Arthur Anderson was held guilty of corporate misfeasance and obstruction of justice and had to finally close down audit operations.
“Following the conviction, multi-million dollar lawsuits brought by Enron investors and shareholders demanding compensation are likely to follow and could bankrupt the firm. “ (Anderson guilty in Enron case 2002).
Accessory to the crimes
The illegal practices in Enron reached its zenith when, under instructions from their auditors, Arthur Anderson, the management and staff of Enron began destroying and shredding all significant papers that could connect them to illegal practices being carried out by Enron, in attempts to shield them from law of the land.
“In 2001, the Enron empire collapsed. The firm’s bankruptcy was the largest in US history, surpassed seven months later by WorldCom’s bankruptcy.” (Enron debacle 1996).
The indictment of top directors
The indictment of the top directors of Enron and their subsequent trials led to the unearthing of embezzlement of millions of dollars by the top management of Enron, either with or without the connivance of their auditors, Arthur Anderson.
“The financial impact of Enron’s collapse has been widespread, leaving a blot on investors’ balance sheets and erasing the retirement savings of many employees who sank everything into the company’s 401(k) plan.” (Balay 2002).
Liquidation of Arthur Anderson
One of the most important things that happened was that the firm, Arthur Anderson was also subsequently forced into liquidation after the Enron debacle
Were they able to avoid or minimize damage to their reputation?
This brought an end to the reputation and credibility that was earned by Arthur Anderson, as part of the Big Five, along with top accounting firms like Ernst and Young, Price Waterhouse Coopers, Deloitte Touche, KPMG, etc. due to the wanton activities of a few irresponsible officials. After the Enron debacle, there was only the Big Four, sans Arthur Anderson. Strong laws like the Sarbanes –Oxley laws were enacted to prevent future corporate malfeasance.
Conclusion
The disgrace to Enron and, by extension, auditors Arthur Anderson, is testimony to the fact that corporate crimes, however well managed, may not be able to see light at the end of the tunnel. The long arms of the law could track down even corporate giant defaulters.
References
- Anderson guilty in Enron case 2002, BBC News: World Edition, Web.
- Balay, DH 2002, The call: Enron debacle offers tough lessons in the ethics: charges of conflict of interest, securities fraud, Holston Conference: United Methodist Church, Web.
- Enron debacle 1996, Riskglossary.com.