Unravelling the Rise and Fall of Arthur Andersen: A Legacy of Audit and Scandal
Arthur Andersen was an American accounting firm based in Chicago that provided auditing, tax advising, consulting, and professional services to large corporations. By 2001, it had become one of the world's largest multinational corporations and was one of the “Big Five “accounting firms 9 along with Deloitte & touché, Ernst Young, KPMG, and PricewaterhouseCoopers.
In 1913, two persons Andersen and Clarence founded an accounting firm as Andersen, Delany & Co.] Later the firm changed its name to Arthur Andersen & Co. in 1918. Arthur Andersen's first client was the Joseph Schlitz brewing company in Milwaukee. In 1915 due to his many contacts there, he was opened as the firm’s second office. In 1927 Mr. Arthur Andersen was elected to the board of trustees of Northwestern University and served as its president from 1930 to 1932. He was also the chairman of the CPA examiner in Illinois.
IN 1970 Arthur Andersen started growing fast and its revenue began to grow. very fast. Its client base started increasing and clients started believing in it. And become one of the Big Five firms in the market with excellent brand value. Arthur Andersen was the first of the major accountancy firms to propose to the financial accounting standard board that employee stock options should be treated as an expense, thus impacting net profit just as cash compensation would.
It also started its consultancy firm named “Andersen Consultancy” It is separate from Arthur Andersen and provides audit, accounting, and tax practice. “Andersen Consultancy “which provides guidance and market information grow rapidly in the market between 1971 to 1981 due to which dispute between Arthur Andersen and Andersen Consultancy began and were facing many problems. In 2000, after the international billion in past payments to Arthur Andersen, and declared that Andersen Consulting could no longer use Andersen's name. As a result, Andersen Consulting needs to change its name to Accenture on January 1, 2001.
In the 2001 scandal energy giant Enron was found to have fraudulently reported $100 billion in revenue through institutional and systematic accounting fraud. The evidence available that Andersen fail to fulfil its responsibility Because the US Security exchange commission will not accept audits rom convicted felons, the firm agreed to surrender its CPA licenses and its right to practice before the SEC on August 31, 2002—vanished firm out of business. In 2002, just nine months after the scandal broke, the firm was found guilty of a crime in auditing Enron.