Free «Arthur Andersen» Essay Paper

1. Assume that you aware of the culture at Andersen while you were being recruited for a position with a then Big Five accounting firm. Would you accept a position with Andersen if it were the only one of the Big Five that offered you a position? Why or why not?

If Andersen is the only one who offered me a position, I will have to think twice and even then I will not accept it. The first reason is that the company has gain a very bad reputation for an accounting profession because of the inappropriate doings. I do not feel respect for Andersen and I also cannot trust the society, working as an auditor in this company. I do not appreciate the culture and dress code in the company; their employees are not working as a team, and the independency of auditors is denied. They work as androids without asking any questions; they are obedient to the authorities, at the same time damaging the company’s name.

First of all, I wish to work honestly, according to my consciences; therefore this job is not suitable for me to accept. Also I know that this company will never keep its promises; the salaries and perks were not given to the employees. I need my salary deposited to my account, but I do not use the same bank as Andersen uses, and I am not going to donate a portion of my salary to any charity, whereas Andersen needs to do it. Finally, I am not interested in joining a downtown club just because Andersen asked to do it. Therefore even if I join it, the same problems will repeat; moreover I may lose my employment and I will never be recruited after working at Andersen.

 

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2. What do you think Toffler may have meant when she said that both accountants and consultants who worked for the firm were “Androids”?

Toffler meant that both accountants and consultants who worked for the firm were “Androids” because they had to respect the authorities and execute their duties correctly and responsibly, like poppets. These accountants and consultants do all commands, the partners ask them to do. Partners of Andersen have the only aim to keep the clients happy and to earn more, even behaving inappropriately. If these accountants and consultants had a backbone they would discuss all the problems with their partners and let them know the gravity of the disaster which may be caused by such a kind of culture. Also they should advise and guide their clients, because the only way to save their businesses is to give a correct advice. They also should not blindly obey and do everything said by the authorities.

3. Does an attitude of “keeping the clients happy” interfere with independence in appearance or in fact? If a firm has a reputation of keeping the client happy, can the firm use a defense of due care in a court case?

“Keeping the clients happy” interfered and corrupted the independence completely. Andersen played the role of auditor of the client’s financial reports and also as their consultant, therefore Andersen should work as an independent body keeping and building up the confidence of their investors too. In this ethical situation of “keeping the clients happy” they were thought only about gaining profits an making more money through this short cut without properly advising the clients, thinking of where they have gone wrong, and how to correct their wrong accounting methods. Andersen only gave the advises to please the clients; also they have gone out of the way to make the clients happy by setting unnecessary working ethics and by selling non-audit services to audit clients. The audit partners were paid according to the level of consulting services sold to an audit client and agreeing to the amount of satisfaction expressed by the audit client. Audit partners were financially fined if involved in a restatement of a client’s financial position, billing for entertainment expenses on involving, in one case, adding the cost of entertainment of the client’s children to the audit fee, golfing with clients, and also recruiting the children of the senior officers of audit clients for summer employment. This has destroyed their independency as an audit firm.

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This method will never make use of the firm to defense of due care in a court case. Their main responsibility for the clients, investors and the states is to provide true and correct audit reports and give their clients the correct advice to run their financial methods more prospectively, without giving false reports and making the clients satisfied all the time. Andresen is guilty of not realizing their main duties and not bearing the responsibility for their doings.

4. Why do you think there may be a cultural difference between accountants and consultants who work for a Big Four CPA firm as Toffler indicates in her book with respect to Andersen?

At Andersen and at Enron, the model of business and the culture of organization were changed. Enron tried to move to a new business which changed the organizational culture and the assets. This is a risk to the investors. Andersen’s movements away from the professionalism in auditing towards the commercialized consulting were the reasons which weakened the auditors as mentors of management. These changes were not right for them; the trading authorities at Enron pursuit the contracts for bigger earnings, but they are not able to clutch the risk of the intangibles which could lead to the rise of the earnings. Likewise, the Andersen’ auditors embraced consulting, and they could not understand the risk of audit failure.

According to another sources, Andersen had serious internal control weaknesses. Accounting advices from Andersen’s national office were ignored by the on-site audit team, and no control was provided in the company to guarantee that the advices were followed. This fact weakened the confidence of the investors. Both Andersen and Enron walk together along a dangerous path as both organizations neglected the fundamentals of internal control.

5. Do you think there will come a time when the accounting profession is down to the Big Three? Why or why not? What could cause such an outcome to occur?

Definitely, there will come a time when the accounting profession will come down to the Big Three. This may happen when the clients will stop buying non-audit items sold by these accounting firms. Existing clients will think more of the current strategy, merger announcements and understand that they should not go for Accountants and Consultants to buy non-audited items. Therefore clients will move to Big Three from Big Four. The following reasons will make them to go down to Big Three: making accounting errors to please clients, inactive audit committees comprising of insiders, lack of support from an audit staff and accountants, planning mergers, insufficient auditor independence, and attitude of “keeping clients happy” in the culture of “billing their brains out”.

All big accounting firms have to concentrate, and understand the clients’ needs and require to reevaluate the existing strategy of each firm, think of who are the clients they want to serve from their data bases, what are the services they want to offer, can they offer novel and innovative services in addition to old ones and how to create different and competitive services for their clients. If the Big Four Accounting firms understand these then they may not worry about their future.