Arthur Andersen was once a leading accounting firm that set standards for the profession but faced scandals due to questionable accounting practices that compromised its independence and integrity. Its culture prioritized revenue growth over ethics. It provided both auditing and consulting to Enron, violating standards by issuing unqualified statements despite improper accounting that falsified financial disclosures. After Enron's fraud was revealed and documents destroyed, Arthur Andersen was found guilty of obstruction of justice and ceased operations. The scandals led to new regulations like the Sarbanes-Oxley Act to strengthen financial disclosures and auditor independence but critics argue it does not prevent all excessive risk taking.

1. ARTHUR ANDERSEN:
QUESTIONABLE ACCOUNTING
PRACTICES
Adhyatmika | Amir Hamzah | David | Kynan | Tantia

2. THE FIRM
INSTITUTIONALIZATION OF ETHICS
THE SCANDALS
THE FUTURE OF INSTITUTIONALIZATION

4. • Set standards for the accounting
profession
• Rock solid character and integrity
• Providing both auditing and consultation
services to giant corporation
• Vast Growth on 1990’s

5. Culture: More concern of its
own revenue growth
Values: Compromising the
auditors independence and
creating conflicts of interest
Legal Compliance: The
Violation of ethical conduct as
public accounting firm

6. The Ethical Practice is Institutionalized into
Generally Accepted Public Accounting
Standards

7. Input Oriented Principle:
General underlying rules and Constraining principles
Output Oriented Principle:
Applicable to users: comparability
Applicable to preparers: consistency and uniformity

8. No Taste for
Accounting
Questionable
Accounting
Practices

9. THE PRACTICE THE VIOLATED STANDARDS
Unqualified Statement: False Unreliable as the gatekeepers
and misleading approvals of
financial statements
Neglecting the practice of Ponzi Falsifying the Financial
Scheme Disclosures

10. THE PRACTICE THE VIOLATED STANDARDS
Unqualified Statement with Unreliable as the gatekeepers
overstated earnings
Being paid for falsifying the Independency as external
results auditors

11. THE PRACTICE THE VIOLATED STANDARDS
Inflating earnings through
recording revenue on contingent Unreliable as the gatekeepers
sales and accelerating sales from
later periods
Unqualified statements despite Independency and ethical
the accounting improper ties judgment as external auditors

12. THE PRACTICE THE VIOLATED STANDARDS
Falsifying the revenue decrease to Unreliable as the gatekeepers
alleviate the stock price
Treat Reserve fund as revenue Falsifying Financial Disclosures
Classifying Operational Cost as long Independency and ethical judgment
term investment as external auditors

13. THE PRACTICE THE VIOLATED STANDARDS
Partnership in Question Auditor and analyst independence
Window-dressing: Unqualified Unreliable as the gatekeepers,
statements with inaccurate Falsifying the Financial
figures Disclosures
Corporate and Criminal Fraud
Destroying Enron Documents
Accountability

14. The True Picture
Enron’s Accounts: The Company announced the restated figures
Year Reported Revised True debt True equity
Income Income restated by restated by
1997 $105m $77m Up $771m Down $258m
1998 $733m $600m Up $561m Down $391m
1999 $893m $645m Up $685m Down $710m
2000 $979m $880m Up $628m Down $754m
Reported and revised income, debt and shareholder equity 1997-2000
following special partnership revelations.

16. Public company accounting
oversight board
Auditor and analyst independence
Enhance Financial Disclosures
Whistle Blower Protection
Corporate and Criminal Fraud
Accountability
Cost of Compliance

17. SOX is very costly to be implemented
SOX not providing comprehensive protection for
excessive risk taking
Regulatory loopholes to mislead the report

19. Ethics set the groundwork for a company to
prosper for many years as an honest corporation
rather than burn out quickly like a profit driven
supernova