Week 2

Week Two Learning Team Reflection: Ethics
Adrianne Gentry, Rachelle Lintag, James Miller, Stacy Pitcher
April 06, 2015
Kenneth Baker

Week Two Learning Team Reflection: Ethics
In this paper it is our intention to discuss the assigned reading “A Sad Tale: The Demise of Arthur Anderson” (Parrino, Kidwell, & Bates, 2015).   Arthur Anderson LLP was considered to be one of the top five accounting firms in the nation (Parrino, Kidwell, & Bates, 2015).   Arthur Anderson provided auditing, tax and consulting services to many large corporations in the United States (Parrino, Kidwell, & Bates, 2015).   However in 2002, the firm was found guilty of criminal charges in a case that was brought to the Supreme Court (Parrino, Kidwell, & Bates, 2015).   The case was eventually overturned; however the reputational damage that this caused to Arthur Anderson was irreversible.   This case was in regards to the way the firm handled the auditing of Enron an energy company that filed for bankruptcy (Parrino, Kidwell, & Bates, 2015).  
Arthur Anderson Made Mistakes Along the Way
The team is of the view that greed played a major role in the mistakes made by Arthur Anderson which ultimately led to its demise. Some of these mistakes included the relentless push to grow the firm’s revenues and profitability; a complete breakdown in internal controls and risk management processes across the firm as well as encouraging selling of business across service lines to an extent that the firm could not safeguard its own independence. Largely as a result of these mistakes, Arthur Anderson put its professional employees in a tough situation by asking them to effectively serve as auditors to their audit clients while also providing very profitable consulting services to the same clients. In some instances, they took on audit clients at fee levels that yielded losses for the audit practice but made up for those losses by cross selling more profitable consulting services to...