1.0 SUMMARY OF FACTS OF THE CASE STUDY
After understanding the overall of case study, Arthur Andersen: Questionable Accounting Practice, we have identified a few facts. The following subsection will present the facts.
1.1 ARTHUR ANDERSEN
Arthur Andersen LLP was founded in Chicago in 1913 by Arthur Andersen and partner Clerence DeLeny. Over a span or nearly 90 years, the Chicago accounting would became known as one of the “Big Five” largest accounting firms in the United States together with Deloitte & Touche, PricewaterhouseCoopers, Ernst & Young, and KPMG. For most of those years, the firm’s name was synonymous with trust, integrity, and ethics. In its earlier days, Anderson sets standards for the accounting
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In that case Andersen was name as having assisted in the fraud by repeatedly issuing unqualified audit opinions on waste management materially misleading financial statement. SEC documents state that there were amount of fees that capped from Waste Management that would pay Anderson’s auditing services. Andersen identified improper accounting practice and presented to Waste Management official report called “proposed adjusting journal entries” that is outlined entries that needed be corrected to avoid understanding Waste Management’s expanses and overstating its earning. In other side, waste management refused to make the corrections and entered a closed-door agreement with Anderson to write off the accumulated errors over a 10 years period also change its underlying accounting practices. This agreement was viewed by SEC as an attempt to cover up past frauds and to commit future frauds. Andersen was paid some $220 million to Waste Management shareholder and $7 million to the SEC for this case. Four Andersen partner were waiting for approval and an injunction was obtained against the firm. Andersen also was forced to promise not to sign off on spurious financial statements in the future. After this matter settled, Waste Management shareholder lost $20.5 billion and bout 11,000 employees were laid-off.
Enron is one of the