Accounting Firm Arthur Andersen 9-1-2002 In an early-1990s purge, the new leaders forced out roughly one of every 10 auditing partners and neutered Andersen's elite corps of in-house ethics watchdogs, who for decades had been the firm's final word on accounting matters large and small. These moves drew scant public attention, but the implications reached far beyond Andersen's headquarters at 33 W. Monroe St., Chicago.
The quiet dilution of standards and the rise of auditor-salesmen at Andersen are central to the scandals that have cost investors billions of dollars, eliminated thousands of jobs and threatened the retirement security of millions of citizens. Most of all, they have cast suspicion over the financial reports that Americans rely on to judge the health of companies where they work and invest.
As the firm spiraled down during the past year, its leaders contended that conflicts between its auditing and consulting missions had no impact on the quality of its work. And they said Enron should be viewed as an aberration, not part of a disturbing pattern.
To determine how the firm fell so far, so fast, the Tribune reviewed volumes of Andersen internal documents, sworn testimony and congressional hearings. Tribune reporters also interviewed scores of Andersen employees--from senior partners to secretaries--as well as federal investigators and industry insiders across a dozen states.
Contrary to Andersen's assertions, what emerges is a cautionary tale, the story of a firm that tried to mix the public interest of an auditing mission with a mercenary consulting culture and botched the job. Even as many of its partners and staff continued to uphold a high standard, others compromised in the interest of generating fees.
"It came down to doing the job as quickly as possible and making the most money. They pushed the edge of the envelope--pushed it too far," said Dean Christensen, who ran Andersen's Columbus, Ohio, office for more than 15 years. "I just think it got out of control. What it ended up being is greed. Total greed."
Andersen's remaining leadership disputed that the firm emphasized the selling of services over audit quality, replacing partners who were strong auditors but didn't generate enough revenue. "Not true," said Andersen spokesman Patrick Dorton, in a written response. "Work performance and commitment to quality have always been an essential part of our evaluation. No one has ever been dismissed because of their commitment to quality, but personnel have been dismissed for an inadequate commitment to quality." Neither Dorton nor any other current Andersen official would address what caused the fall of the firm, or whether its own actions contributed to its collapse.
Andersen and other audit firms are supposed to be guardians of the public trust, functioning like the father confessors of the financial world. They know the rules and how to enforce them, defining right and wrong for the corporate flock. If an accounting firm puts its name on a financial statement, it certifies to the public that the company is playing by the rules, and that the numbers conform to minimum standards of conduct.
Consultants, by contrast, are the corporate apostles of change. Few ever got rich advising clients to remain the same. Instead, they battle the status quo, challenging the accepted ways of doing business and offering to fix the problems they identify. At Andersen, that involved selling everything from computer systems to management advice.
The two roles rarely mix well--a fact Arthur Andersen himself warned about as far back as the Great Depression. "To preserve the integrity of the reports, the accountant must insist upon absolute independence of judgment and action," he said in a lecture on ethics at Northwestern University's School of Commerce.
In practice, that meant Andersen sought to always put consulting at the service of auditing. In recent years, however, that principle got turned on its head. "The culture changed where the auditor was no longer the guy people respected in the '80s and '90s," former Andersen Chief Executive Harvey Kapnick said in an interview last month, just days before his Aug. 16 death.
Kapnick left Andersen's top job in 1979 after he unsuccessfully sought to address government concerns about conflicts of interest by splitting the audit and consulting practices. "If you were an auditor," he observed, "you were relegated to second-class status. If you were a consultant, you were the top of the heap." Andersen officials disagree. "Our audit practice, until recently, was the largest component of our business and a critical part of the firm's business strategy and its profitability," said spokesman Dorton.
Through the 1990s, though, Andersen aggressively sold lucrative consulting services to those who relied on them for audits in what turned out to be a profitable strategy. Andersen's top partners tripled their earnings in the '90s, a feat that put them on a par with their Andersen consulting siblings, who had split into their own division in 1989.
But the new strategy also planted the seeds of the firm's downfall. Suddenly, partners who faced accounting dilemmas with clients had a lot more at stake when deciding whether to reject questionable practices uncovered in audits.
The fallout from those decisions has unfolded in the headlines about shredded documents, restated earnings, shady loans and financial sleight of hand at Enron, WorldCom Inc., and Waste Management Inc., all Andersen clients beset by accounting scandals. http://www.chicagotribune.com/news/chi-0209010315sep01-story.html
.....................................................................................
7-1-2013 Sleight of hand, of course, is not magic but a skilled use of distraction to keep the "mark" from noticing the real act that is being done. It takes advantage of a natural tendency to follow the obvious and to miss the more important thing that is carefully obscured....
Government takes our money and squanders it on those who do not deserve it, so the line goes, and the audience cheers. Government purportedly takes more and more control of our lives, and the crowd responds, "Never!"... While leaders raise the specter of "Big Government" coming to take away our freedom, we are effectively distracted from the realization that "Big Money" already has. http://www.ethicsdaily.com/political-sleight-of-hand-distracts-from-weightier-issues-cms-20887
................................................................................1-12-2013 Obama, of course, promised that health insurance would be made more "affordable" by his Obamacare legislation. It was even named the "Affordable Care Act." Yet, in reality, it has made health insurance LESS affordable, which was the plan from day one since the plan was written by health insurance companies and Big Pharma....
Behind the curtain, everything being said by Obama (and Bush before him) is just part of a system of manipulation designed to convince people they are not being enslaved even while the chains of total control are being silently clasped around their wrists. This is how well-meaning people get suckered into supporting tyranny. They believe in the parlor tricks of slick-talking politicians. https://www.naturalnews.com/038649_parlor_tricks_illusion_government.html
....................................................................................................................................................
-Leonora: Pearls of Wisdom 13:34..............................................................................................................................................................
-The Great Tax Robbery by Ronald Brooks, 2014, prologue https://books.google.com/books?id=bJycAwAAQBAJ&pg=PT1&dq=great+robbery+brooks&hl=en&sa=X&ved=0ahUKEwijv4ySwO3ZAhUU6WMKHfCdCkUQ6AEILzAB#v=onepage&q=great%20robbery%20brooks&f=false
................................................................................................................................................
2-10-2013 As the credit crunch bit hard into the British economy, the esteemed head of Her Majesty's Revenue and Customs decided to swap the grey chill of London — flying business class, naturally — for a five-star hotel in the Indian sunshine.
It was December 2010 — the height of the financial crisis that saw politicians call on the British people to remember Winston Churchill's cry that 'we're all in it together'. Yet that sentiment seemed far from the mind of civil service mandarin David Hartnett.
Travelling at taxpayers' expense to attend the Mumbai International Taxation Conference, Hartnett — happily married with three children — was accompanied by another senior tax official from his department called Melissa Tatton: the pair spent four days enjoying this vibrant seaside Indian city, staying in £200-a-night rooms on the executive floor of the ITC Maratha Hotel.
Happily for him, work did not get in the way too much on this 'jolly' for Britain's top tax official: he and Ms Tatton each spoke for 30 minutes at the obscure conference sponsored by a tax advisory firm from the Indian Ocean island of Mauritius and attended a one-hour discussion session afterwards.
-Then permanent secretary for tax in HMRC David Hartnett (right) in Mumbai with another senior official from his department Melissa Tatton (left) in 2010
Of the 500 delegates, most were from private Indian accounting firms, while the only other government tax officials present were a mid-ranking civil servant from New Zealand and India's own chief of income tax.
Apart from their brief appearance at the conference, Hartnett and Ms Tatton spent much of their time lounging around their five-star hotel and indulging the taxman's favourite hobby of gourmet dining in some of its seven restaurants.
The jaunt cost an estimated £6,000. It was, of course, paid for by the British taxpayer, which was all the more galling considering the public were being squeezed by the new era of austerity. Hartnett, after all, was the very man who was supposed to be trying to raise as much money as possible to reduce the soaring deficit.
No comments:
Post a Comment