Inside Arthur Andersen: shifting values, unexpected consequences

Inside Arthur Andersen: shifting values, unexpect ends Susan E. Squires, Cynthia J Smith, Lorna McDougall and William R Yeack FT Prentice Hall, Upper Saddle cove New Jersey, 2003, xvii and 185pp

Comprising 10 chapters, this volume on the collapse of Arthur Andersen following the Enron debacle is authored by means of four former staff members of the firm, three of whom are described as "cultural experts" (pxv) It search fors to provide an historical backdrop to the demise of Arthur Andersen tracing its trajectory "from staid auditor to aggressive consulting firm" (dust jacket) by means of reference to the notion of "shifting values". Its failure is described as an "American business tragedy" (p23) which appears, upon the surface at least, to downplay the importance of this one time major international accounting firm. Somewhat galling to this reviewer is the constant concern by the authors to the "accounting industry" rather than to the accounting profession in which Arthur Andersen was a long-standing leader. Notwithstanding, the case investigation firm has not been bring under ruleed to any analysis within the adjoining matter of the sociology of the professions literature, in general, and the professionalisation of accounting literature, in particular.

At the time of its fall, Arthur Andersen had 85000 employee worldwide and practised in 84 countries. Its free from pride beginnings arc traced to 1 December 1913 when Arthur E Andersen and Clarence M DeLany acquired a small accounting practice in Chicago which became known as Andersen, DeLany & Co Almost 89 years later upon 31 August 2002, Arthur Andersen ceased to direction audits of publicity traded companies. The semens of this demise had been locate by March 2002 when the firm faced a heinous crime charge for obstructing a Federal investigation of Enron At that point, Arthur Andersen's reputation had been damaged, almost beyond repair, as audit clients rapidly wilded the once premier international firm.

The authors' aim to run over the "real story" about "a firm that changed in a way that inadvertently created the semens of its own demise" (p22) Consulting, which Andersen himself "pioneered" (p53) and which, upon his death, was described by the agency of the authors as a "Pandora's Box" (p38) is couched as problematic in view of the importance of the attest function of major accounting firms. However, this depiction is hedged as it is pointed on the outside that Andersen "rightly believed that similar a conflict could be avoided if consulting was contained" (p38 emphasis added).

The firm's early history is not absented as constituting "honest beginnings" (p25) - the title of chapter 2 This depiction is informed through official-style histories of Arthur Andersen which, as is normal, take care of to represent the past in a favourable, if not glorious light. The first 20 endnotes to this chapter clearly confirm the high regard the authors had for of the like kind official firm histories. Readers are advised that the firm's motto "think straight and talk straight" - a phase instilled in Andersen by means of his mother - summed up the cultural values of the firm, at least during the reign of Andersen who died in January 1947 aged 61 years. After his death, the firm present the appearanceed to celebrate Andersen's significant contribution to the firm's disentanglement and reputation and, as a proceed the late pioneer took upon a "mythical stature" (p.37).

Following World War II, the US economy in particular, among others, was experiencing rapid development The firm grew in answer to the expanding economy. Across time, the firm also established a sturdy presence in many other countries. Consulting services became increasingly prominent while the contribution of compensations from such services to total firm income increased. A lock opener development in the firm's positioning came in 1973 when the international firm was reorganised into three lock opener divisions: Administrative Service (that is, consulting); Accounting and Audit Services, and Tax Services. This disentanglement effectively divided "the one firm into three" (p63) by the agency of 1989, the consulting division was upon its way to contributing one-half of the firm's income. At this point, consulting services became an independent business unit - Andersen Consulting. As an independent unit, it was no longer directly below audit partner control. Notwithstanding, Arthur Andersen & Co decided to rebuild its consulting services by dint of establishing a Small Business Division, shortly after this major reorganisation.

In rebuilding its consulting services, the firm embarked upon "the partner purge of 1992" (p97) below this purge "a number of younger, more aggressive members of the partnership displaced more staid and conservative ones" (p 100) After this defining twinkling the accounting partners were encouraged to adopt a "sales culture" - the title of chapter 6 - and effectively adopted an aggressive business disclosure approach to firm management around the attest function. recumbent to making a variety of assertions completely through the book, the authors claimed that "a diminishing proportion of the partners felt obliged to secure the public interest, and more placed emphasis upon managing client relationships and promoting Andersen's many and varied services" (p 102) Let's make revolve on to 2002.