Corporate Ethics Failure †A Critical Analysis Essay

Arthur Andersen, in 1913 established a corporate entity that for decades provided a benchmark for auditing and consulting in the accounting industry. From the on put Mr. Andersen worked to build a ft for his come with representative of the principles of excellence in the technical and respectable aspects of his sensitive caller. His ethical model focused on Utilitarianism, the greatest amount of in effect(p) for the greatest amount of people. In the late 1940s after the feed passed away, newly ap doomed CEO, Senior Partner Leonard Spacek, further exhibited his leadership and inscription to ethical practices by helping to establish the Accounting Principles Board, their prinmary responsibilities being to set industry accounting and ethical standards. This is a direct reflection on the commitment Arthur Andersons executive staff place on the comp eithers belief in performing their practice in an honest and authoritative modality. Spacek was so revered that former Federal Re m ilitary service Chairman capital of Minnesota Volker once refered to as Spaceks tenure as a judgment of conviction when Arther Andersen was the Gold Standard for the accounting industry.See more how to write a critical analysis outlineThese standards built a reputation in the accounting association which led to tremendous success. Honesty and integrity were trademarks of the company that concentrated on quality, leadership and developing its personnel to be experts in every aspect of the accounting industry . As the business began to grow, Arthur Andersen eventually became a leader in the fiscal industry, employing as much as 77,000 accounting professionals in 84 countries. A reflection on the some(prenominal) positive aspects of Arthur Andersen, its commitment to the many ethical principles it championed, both(prenominal) in its suffer corporate structure and that of the accounting community. In this writers opinion, with such metrics in place, it is amazing that such a larg e entity could implode and collapse. However, if one take cares the enormousness of ethical behavior and the impact of lost trust, the analysis is non difficult. The problems encountered at Arthur Anderson were the result of inappropriate ethical behavior which resulted from compromises of their own ethical standards.These began as small issues for various clients that over time grew creating a slippery ramp from which Arthur Andersen could not recover. Corporate enterprises are funded by investors, stockholders and consumers. Likewise, their activities, both internal and external, in any case affect investor, stockholder, stakeholder and consumer. All depend on the financial health and viability of the company to support their individual interests. The responsibility of the atomic number 16 is to verify financial wellbeing and provide a tool for which potential investors and stock buyers can sanely judge the risks involved as they decide which company their money should s upport.Auditors sell the responsibility the provide analysis of the the financial condition while aspect for errors in the bookkeeping/ accounting of the companys financial bearing. The attenders responsibility is to correct or balance any errors hence preventing a misleading pile of the real financial strength of the company. If this view is compromised by providing or allowing false data to exist, the companys position is weakened, investors are led under false pretenses, placing their investments at risk. The SEC depends on a complete, thorough and truthful analysis from an auditor to verify the financial status providing security for those desiring to invest or provide financial support.Arthur Andersens problems began precisely as mentioned earlier, when executives began to Behave unethically in a manner against the principles on which the company was founded. It is important to note that while Arthur Anderson employed commodity business ethics, the company flourished. A s it began to compromise its integrity the dour term consequences eventually to appear. The Enron collapse represents just one of many cases where mistakes were do and hidden. For Arther Andersen, in business almost 90 years, the destruction of Enron documents to prevent the SEC from gaining access to incriminating evidence shows how corrupt the accounting firm had become. musical composition millions of dollars in revenue for Arthur Andersen were at stake, the viability of the company depended on the reputation it garnered. The decease of the company resulted from the dishonest tactics it employed to remain in power. As of June , 2002, the company had laid off 7,000 employees, and lost more that 650 of its 2,300 world audit clients with the layoff of thousands pending. The slippery slope to extinction had begun. http//money.cnn.com/2002/06/13/news/andersen_verdict/In the article 12 Ethical Principles for business organization Executives by the Josephson Institute, published on December 17, 2010, stated that language establishing standards or rules describing the kind of behavior an ethical person should and should not engage in, are ethical principles. More specifically they are specified as Honesty, Integrity, Promise keeping and Trusworthiness, Loyalty, Fairness, Concern for Others, uprightness Abiding, Commitment to Others, Leadership, Reputation, Morale and Accountability.http//josephsoninstitute.org/business/blog/2010/12/12-ethical-principles-for-business-executives/ The founder, Arthur Andersen, embodied these principles to the point that he personally reimbursed a client for an accounting mistake fall in under his watch. While a disclaimer on the part of Arthur Andersen guards against fry mistakes in the accounting audit/ review, it seems this created a gray area that was interpreted advantage of. Also, management should have developed a zero allowance account mechanism to maintain an ethical culture dedicated to preventing inappropriate behav ior. form _or_ system of government should have mandated regularly documented training on business ethics, and the importance of its implementation as the auditing process ensued. whatever issues should have been to the client with rapprochement mandantory prior to an Audit Opinion being submitted.The indictment of Arthur Andersen and subsequent streamlet provided proof the Audit Opinion and review of Enrons balance sheet and financial statements were submitted with the intention to skew the true condition of the companys true fiscal condition, thus deceiving the shareholders, board of directors, potential investors and stakeholders. An overview of the measures in place to fortress against inappropriate accounting behavior provide an insite to the items that were violated during Enron and Arthur Andersens quest to get investors share holders of millions. These safety measures included principally Accepted Accounting Principles (GAAP), Generally Accepted Auditing Standards (GAA S), Statements on Auditing Standards (SAS), and all professional ethics. The use of GAAP by accountants is standard protocol. An accountant follows these principles as a matter of daily routine. agree to several accounting texts, GAAP is identified as a high-power set of both broad and specific guidelines that companies should follow when measuring and reportage the information in their financial statements.http//faculty.mckendree.edu/scholars/2004/stinson.htmThe article 7 Principles of Admirable Business Ethics presents seven additional principles which complement ethical behavior. Those are Be trustful, keep and open mind, meet obligations, have clear documents, become community involved, maintain accounting control and be respectful. http//sbinformation.about.com/od/bestpractices/a/businessethics.htm In conclusion, legal analysts formulate the opinion that executives at Arthur Andersen and Enron did not set out to have a positive impact on the accounting industry or any industr y.They set out to make as much money for themselves as quickly as possible. They were unbidden to do whatever it took to make that money. These thoughtless acts and greed led both companies to an eventual downfall in bankruptcy. The subsequent prosecution of these firms has produced new controls which should serve to prevent this type of financial disaster. Most notably the Sarbanes-Oxley Act which includes requiring companies to appraise its internal audit procedures and makes sure the accounting practices either meet or exceed the expectations of the auditors. http//faculty.mckendree.edu/scholars/2004/stinson.htmStatement Regarding Professional ConductThis assignment is my own work. Any assistance I received in its preparation is acknowledged inwardly the assignment in accordance wth academic practice. If I used data, ideas, words, diagrams, pictures, or other information from any source, I have mobilised the source(s). I understand that copying text word for word from other s ources without placing it in source marks is considered plagiarism and not acceptable even if I cite the source where the material was copied from. I certify that this assignment was prepared specifically for this class and has not been submitted in whole or in part, to any other class at Walsh or elseware.