corporate ethics - arthur anderson v3.0

8/6/2019 Corporate Ethics - Arthur Anderson V3.0

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CORPORATE ETHICS

, &n an th ram an K art hikM u r a l i d h a r a

:ersion 5 25


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Karthik 2

Objectives


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Karthik 3

Story Board


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Karthik 4

Graceful Start

About Arthur Anderson Was one of the big 5 accounting

firms, founded in 1913

Provided auditing, tax and consultingservices

Clientele: WorldCom, WasteManagement Inc, Sunbeam Products

& Enron HONESTY was the founders guiding

principle Think straight and Talkstraight

Accenture is the consulting arm of the


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Karthik 5

Graceful Start


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Hall of fame to hall of shame

-191346

-1947 69 -1970 97 1998 2001 2003till now

Milesto

nes

Rise

Pinnacle

Inception &

Growth

Time

,

, &Incorporated as Andersen DeLany Company Renamed as Arthur AndersonRepresents Commonwealth Edison

.Arthur Andersen's death passes leadership to Leonard Spacek &Spacek leads for 26 years converts it into a international firm

AA becomes largest firm in the worldThe employees number crosses 20000

- .

.Inflated pre tax income reported for Waste Management inc Settled lawsuits in for $ 75 million ,Falsify successful restructuring of Sunbeam to sell at inflated price

.

Enron files a USD 618 mil Loss in Q3 David Duncan ordered destruction of all audit material ,SEC issued subpoenas on Nov 8 but destruction continued

AA is convicted of obstructing justice WorldCom earnings overstated by several billion USD Qwest company stated a one time revenue as recurrin

,200 employees no customer

A federal appellate court rules that the 2002 convict

2002

Begin of end


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Ananth 7

The Beginning of the end

Inflated pre-tax income reported forWaste Management inc.

Settled lawsuits in 1998 for USD 75

mil., plus USD 7 mil. SEC fine Falsify successful restructuring of

Sunbeam, to sell at inflated price

Sunbeam settlement ?


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The Fall - Enron

Reported income, asset values andcash-flow UP

In Q3 2001, Enron filed a USD 618mil. Loss

David Duncan ordered destruction ofall audit material

SEC issued subpoenas to AA on Nov8 2001, but destruction continued

More than 2 tons of paperwork was

destroyed


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Ananth 9

Post Enron

WorldCom earnings overstated byseveral billion USD

Global Crossing company, audited byAurther Anderson, had overstatedearnings

Early 2000, Qwest company, audited

by Arthur Anderson, stated a onetime revenue as recurring.


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Murali 10

The aftermath

Tens of thousands of unrelatedemployees lost jobs

Thousands of innocent partners, losttheir whole life earnings


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Murali 11

Corporate Ethics what wentwrong

Destroying the records, knowing verywell that a judicial inquiry is imminent

Greed and arrogance is the cause for

wrong doings Original honesty vision of the founder

was ignored

Lust of money

Needed a visionary leader

Common orientation program for ethicsneeded


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Murali 12

Corporate Ethics what wentwrong

Protecting ethics and values of thecompany

Failure in Leadership

Customers were put ahead ofintegrity

Mandatory audit training eliminated

Failed to adapt to changing and fastbusiness

Revenue goals taking precedenceover values


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Murali 13

Conclusion

SOX compliance strengthened

Corporate governance

IFRS (advanced version to GAAP)

Protection to whistleblowers

Count of failures before and after You make money in the new economy in the same ways you

make money in the old economy by providing goods orservices that have real value.

Financial cleverness is no substitute for a good corporatestrategy.

The arrogance of corporate executives who claim they arethe best and the brightest, the most innovative, andwho present themselves as superstars should be a redflag for investors, directors and the public.

Executives who are paid too much can think they are abovethe rules and can be tempted to cut ethical corners to

retain their wealth and perquisites.


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Murali 15

E ve n th e Presid en t of th e U n ite d S tates:jo ke d W e ju st rece ive d a m e ssag e from

. S a d d a m H u s se in T h e g o o d n e w s is th a t h e s

, ,w illin g to h a v e h is n u cle a r b io lo g ica l a n d

.chem icalw eap ons counted The bad ne w s is he.w an ts A rthu r An de rsen to do it

ill d e sig n e d o rg a n iza tio n a l a rch ite ctu re s ca n re su lt in.po or pe rform a nce a nd eve n com pa ny failure A n

im p o rta n t q u e stio n is w h e th e r A n d e rsen s fa ilu re ca n.b e tra ce d to in a p p ro p ria te o rg a n izatio n al ch o ice s

A n e ve n m ore critical q u estion is w h e th e r oth e r .m an ag ers can lea rn from A nd ersen s m istake s

,Think straight talk straight

In addition to changing Andersen s organizational,architecture Samektried to change the softer . ,elements of AA s corporate culture For example

,the dress code was relaxed the wooden doors at

,AA s office entrances were removed and the firm, .adopted a new corporate logo the rising sun

- -Rather than just handling the once a year audit of the,public books the firm offered to take over the entire

internal bookkeeping function for their clients and.provide internal audit services

In the mid-1990s, Andersen hired Enrons entire team of 40internal auditors. It added its own people and opened anoffice in Enrons Houston headquarters. With more than150 people on site, Andersen staff attended Enron meetingsand provided input into new businesses and other strategicissues. While the revenues from Enron represented a smallfraction of Andersens overall revenues, they were a largefraction of the Houston offices revenue and much of the

livelihood of the firms lead auditor in Houston, DavidDuncan.


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Murali 16
http://politicalhumor.about.com/library/images/blpic-enronfield.htm


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corporate ethics - arthur anderson v3.0

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