Arthur Andersen

By: Darshana Patel & Kareen Ratnam Date: February 27, 2009 Teacher: Ms. Cuttle Course: BAT4M1

Agenda
o o o o o o o Overview Biography Enron Scandal International Auditors Impact on Accounting Future Outlook Conclusion
Video

Overview
o Was once one of the "Big Five" accounting firms o Found guilty of criminal charges relating to the firm's handling of the auditing of Enron o This scandal calls into question the reliability/trust in accounting firms

Biography
o Born on May 30, 1885, he was the founder of the accounting firm Arthur Andersen o Was hired as the assistant to the controller of Allis-Chalmers in Chicago

o Became intrigued with the work of

independent public accountants

Biography
o 1908 became a Certified Public
Accountant, the youngest CPA in the state of Illinois o 1913 he bought out a firm to form Andersen, Delaney & Co o Became Arthur Andersen & Co. in 1918

Biography
o Died in 1947
o Was named to the Accounting Hall of

Fame in 1953
o Northwestern University dedicated

Arthur Andersen Hall in 1979 to

commemorate his life

Enron Scandal
o On June 15, 2002, Andersen was
convicted of obstruction of justice for shredding Enrons financial documents Enron scandal o Nancy Temple and David Duncan were the responsible managers in this scandal

Enron Scandal
o Surrendered its CPA licenses August 31, 2002 - effectively putting the firm out of business in the U.S. o Taken over by the local firms of the other major international accounting firms

International Auditors
o Was once known as "Big Five" auditors
o Today it is known as the Big Four:
PricewaterhouseCoopers Deloitte Touche Tohmatsu Ernst & Young KPMG

International Auditors
o Main Objective: To provide auditing, tax,
and consulting services to large corporations.

Impact on Accounting
o July 30, 2002 creation of the U.S.
Sarbanes-Oxley Act (SOX) signed into law o This law provides:
Stronger penalties for fraud Requires public companies to avoid making loans to management

Impact on Accounting
o This law also provides:
To report more information to the public To maintain stronger independence from their auditors To report on and have audited, their financial internal control procedures

Impact on Accounting
o Loss of trust due to the misrepresentation
of the financial position of companies

Scandals
o Enron is not the only accounting scandal
to date:
Chiquita Brands International
AIG

Only Recently -Satyam Computer

Services Ltd. (Jan. 2009)

Future Outlooks
To improve:
o A number of accounting programs are now incorporating increased ethicsrelated material into their curriculum o There is a movement throughout the field

towards adoption of international

accounting rules

Future Outlooks
o If these scandals keep up, the accounting profession will lose its respect and trust o Economy as a whole is impacted when not using proper accounting procedures

Conclusion
http://www.cbc.ca/money/story/20 02/06/15/enron_anderson020615. html

Who is Arthur Andersen?

He is a founder of a accounting firm Arthur Andersen.

Andersen was convicted of obstruction of justice for ___________ Enrons financial documents which led to the Enron scandal.
Shredding

The international auditors were once known as "Big Six" auditors or accounting firms. Today it is known as the Big Five. TRUE or FALSE
FALSE. They are known as the Big Four

Which one of the following is not a accounting firm?

a) b) c) d) PricewaterhouseCoopers Deloitte Touche Tohmatsu Arthur Andersen Ernst & Young
c) Arthur Andersen

What is the main objective of a accounting firm?

To provide auditing, tax, and consulting services to large corporations.

Which law came into action after the Enron Scandal?

a) The Canadian Sarbanes-Oxley Act (SOX)

b) The U.S. Sarbanes-Oxley Act (SOX)

c) The U.K. Sarbanes-Oxley Act (SOX)

d) The China Sarbanes-Oxley Act (SOX)

b) The U.S. Sarbanes-Oxley Act (SOX)

What is the U.S. SarbanesOxley Act (SOX)?

A law or set of rules meant to prevent the accounting fraud like the Enron

Arthur Andersen was named to the Accounting Hall of Fame. True or False
True

Name any other accounting scandal that has happened in the past or even recently, other than Enron.
Chiquita Brands International, AIG, or Satyam Computer Services Ltd

How many jobs were lost after the Enron Scandal?

a) 83000 b) 85000 c) 87000 d) 89000

b) 85000

KPMG is also one of the accounting firms. True or False

True

When was the creation of the U.S. Sarbanes-Oxley Act (SOX), signed into law?
a) June 30, 2002 b) June 30, 2001 c) July 30, 2002 d) July 30, 2001 c) July 30, 2002

Many accounting programs are now incorporating increased ethics-related material into their curriculum. True or False
True

What is CPA? (full form)

Certified Public Accountant

THANK YOU!