Arthur Andersen

Biography

Arthur Andersen LLP, based in Chicago, is an American holding company and formerly one of the "Big Five" accounting firms among PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young and KPMG, providing auditing, tax, and consulting services to large corporations. In 2002, the firm voluntarily surrendered its licenses to practice as Certified Public Accountants in the United States after being found guilty of criminal charges relating to the firm's handling of the auditing of Enron, an energy corporation based in Texas, which had filed for bankruptcy in 2001.[1] The former consultancy and outsourcing arm of the firm, now known as Accenture, which had separated from the accountancy side in 1987 and renamed themselves after splitting from Andersen Worldwide in 2000, continues to operate and had become one of the largest multinational corporations in the world until 2002.

Research Interest

The Andersen indictment also put a spotlight on its faulty audits of other companies, most notably Waste Management, Sunbeam, the Baptist Foundation of Arizona and WorldCom. The subsequent bankruptcy of WorldCom, which quickly surpassed Enron as the then biggest bankruptcy in history (and has since been passed by the bankruptcies of Lehman Brothers and WaMu in the 2008 financial crisis) led to a domino effect of accounting and corporate scandals. On May 31, 2005, in the case Arthur Andersen LLP v. United States, the Supreme Court of the United States unanimously reversed Andersen's conviction due to what it saw as serious flaws in the jury instructions.[12] In the court's view, the instructions were far too vague to allow a jury to find obstruction of justice had really occurred. The court found that the instructions were worded in such a way that Andersen could have been convicted without any proof that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The opinion, written by Chief Justice William Rehnquist, was also highly skeptical of the government's concept of "corrupt persuasion"—persuading someone to engage in an act with an improper purpose even without knowing an act is unlawful.