Arthur andersen enron case study

Read the Ethics case, "A Sad Tale: The Demise of Arthur Anderson" located in the
WileyPLUS Week Fundamentals of Corporate Finance Chapter readings.

Discuss the mistakes made
by Arthur Anderson and potential actions that leadership could have
taken to prevent the organizational failure.

Write a 350- to 700-word summary of your discussion.

A SAD TALE: The Demise of Arthur Andersen

In January 2002, there were five major public accounting firms: Arthur
Andersen, Deloitte Touche, KPMG, Pricewaterhouse-Coopers, and Ernst
& Young. By late fall of that year, the number had been reduced to
four. Arthur Andersen became the first major public accounting firm to
be found guilty of a felony (a conviction later overturned), and as a
result it virtually ceased to exist.
That such a fate could befall Andersen is especially sad given its early
history. When Andersen and Company was established in 1918, it was led
by Arthur Andersen, an acknowledged man of principle, and the company
had a credo that became firmly embedded in the culture: “Think Straight
and Talk Straight.” Andersen became an industry leader partly on the
basis of high ethical principles and integrity.
How did a one-time industry leader find itself in a position where it received a
corporate death penalty over ethical issues? First, the market changed.
During the 1980s, a boom in mergers and acquisitions and the emergence
of information technology fueled the growth of an extremely profitable
consulting practice at Andersen. The profits from consulting contracts
soon exceeded the profits from auditing, Andersen's core business. Many
of the consulting clients were also audit clients, and the firm found
that the audit relationship was an ideal bridge for selling consulting
services. Soon the audit fees became “loss leaders” to win audits, which
allowed the consultants to sell more lucrative consulting contracts.