Arthur Anderson Case

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Arthur Andersen

In 1896, the state of New York passed a law officially recognizing the qualification of Certified Public Accountant as a professional qualification1. It was not until 1924 that Certified Public Accountants were recognized nationally as professionals. With the fast paced financial world and market emerging in the early 1900’s, the personal and business need for professional accountants was really starting to grow. On February 3, 1913, the sixteenth amendment of the United States Constitution was passed. In short, this amendment gave congress the power to issue an income tax without apportionment. In other words, they can take some of what you make as a tax and not give it back equally according to state size and other factors. …show more content…

The Arizona Baptist foundation fraud occurred when auditors did not discover the complex Ponzi scheme that was happening and issued clean opinions for the company. As a result, Andersen agreed to pay investors $217 million dollars. The Sunbeam fraud occurred when auditors did not discover that the company was overstating its’ income. The company authorized “unqualified” opinions on 1996 and 1997 financial statements despite awareness of many accounting and disclosure improprieties. Waste Management Fraud occurred when Andersen issued materially false financial statements of over-inflation of income by $1.43 billion from 1992-1996. Arthur Andersen would not publicize the fraud if mangers at Waste Management agreed to amortize its ill-gained profits over a ten-year period. The Enron fraud was the last for Arthur Andersen. The company served as Enron’s outside auditor, internal auditor, and provided consulting services. Andersen was found guilty of deleting 30,000 e-mails and shredded documents to cover up the profits that were really losses. Found guilty in criminal charges, Andersen had to pay $74.5 million to Enron investors, and $16 million to creditors. In 2002, the firm voluntarily gave up their license to practice Certified Public Accountancy in the US after being found guilty in criminal charges relating to Enron.
The frauds that occurred under the audits of Arthur Anderson in the 1990’s into the 21st century had a direct correlation from the new culture at the company. Audit partners had little involvement with issuing opinions and had poor professional conduct. The company rewarded employees for the largest bid amounts brought into the company. Andersen had lost sight of its foundation of principles that it was built on providing quality audits to

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