ALEEEM MANSOOR

FA18-BAF-019

Corporate governance

Assignment no. 3
Question no.1
In 1913 in Chicago Arthur Andersen LLP was created by Arthur Andersen. The accounting
company has become renowned in the United States over 90 years as one of the largest
accounting companies. They offered multinational enterprises with audit, tax and consultancy
services. The public emblem of trust, integrity and ethics was the Arthur Andersen business. It
would put the general public's interest first. They drew customers with their reputation, resulting
in substantial profits for the firm. At the time, however, Arthur Andersen was turned into a firm
focusing primarily on profits. In the year 2000 the consultancy Arthur Anderson chose to go
independent. In this way, its staff simply increased profits and gave away their fundamental
ideals. Arthur Andersen has also been implicated in several accounting and auditing fraud
incidents via deceiving stakeholders and falsifying reports. The public reputation of the firm has
fallen. Initial profit for the firm was poor. The corporation with Enron has mostly participated in
a number of controversies. Finally, the firm was forced to close in 2002.

Question no.2
Since 1986 Enron has been one of Arthur Andersen's largest customers. At the mid-1990s Arthur
Henderson recruited and created an office in the ENRON headquarters with 40 internally
responsible auditors and its own personnel. Enron paid four better auditing consequences for
Arthur Andersen's auditing firm. Arthur Anderson ignored the fraud and manipulation ended in
his financial accounts, signed and signed the accounting SPEs and off-balance business
operations. Anderson launched a massive "shred" campaign while Enron was investigated by
federal authorities. Enron Corporation filed for the most serious bankruptcy in the history of the
U.S. on December 2nd, 2001.
When the client has been investigated, Anderson's retention policy must erase customer
documents. The SEC initiated a formal Enron inquiry and sought an accounting document in
declines. But by shredding they destroyed 2 tons of paper. Records were destroyed until
Andersen was advised to halt shredding of documents by the SEC Header.

Question no.3
Following are the reasons of downfall of Arthur Anderson:
• Conflict of interest because Anderson did not just audit Enron but also advised the
company. That was not ethical, and the resulting fiscal audit was confusing.
• Documents shredded by the US Security Exchange Commission in fear of inquiry.
• At that time, United States lower accounting standards.
• Arthur Anderson's ineffectiveness of partnership structures.
• Money competition happens where the consulting side earns a lot of earnings than the
auditing side, which encourages them to acquire wealth regardless of means.
• Enron employed Arthur Anderson's previous employee, who had solid business contacts.
• The "Global Crossing" fail, the 4th greatest bankruptcy of any corporation, culminated in
Arthur Anderson's subsequent research and disaster.
• Auditing greed and auditors' ethical conduct