The Fall of the Andersens
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The Fall of the Andersens
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Andersen was fined $7 million by the Securities and Exchange Commission (SEC) for overstating the earnings of Waste Management Corporation.
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Enron was under the investigation of SEC for dubious accounting figures.
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Following the fall of Enron, Arthur Andersen was subjected to investigation by the regulatory boards as well.
The significant stakeholders are: major clients such as Enron, WorldCom, Sunbeam and HIH, Australia, Fred Andersen, investors and 85,000 employees in Arthur Andersen.
Normative issues for the involved parties:
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The ethnics which was brought forward by the founder was abandoned by the last successor of Andersen as they doctored the earning figures of clients and failing to comply with the regulatory boards.
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Enron- executives are found to have tampered with the accounting figures
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Employees of Andersen shredded questionable documents belonging to Enron.
Normative principles in this case:
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Under Deontological Ethics, The Principle of Honesty – do not deceive, relates to the early Andersens which was built up by forefathers, with values in honesty and responsibilities towards its investors, rather than its clients. Ethnical judgments include the refusal to sign flawed accounts. Andersen has violated The Principle of Honesty by signing off questionable accounts for Enron, to create a positive profit figure to the public. This proved to be intent to deceive investors and clients and ignorance of such dubious figures could result in careless investments from potential clients, creating substantial losses for them as well.
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Under Deontological Ethics, The Principle of Lawfulness — do not violate the law relates to Enron’s executives. They are found to have doctored the actual figures of their accounts and did not comply with the GAAP. Enrons executives overstate profit by at least $600million.