Volume 1, Issue 1, 2004
N. Craig Smith, Michelle Quirk
From Grace to Disgrace
The Rise and Fall of Arthur Andersen
In June 2002, Arthur Andersen LLP became the first accounting firm in history to be criminally convicted. The repercussions were immense. From a position as one of the leading professional services firms in the world, with 85,000 staff in 84 countries and revenues in excess of $9 billion, Andersen effectively ceased to exist within a matter of months. Although Andersen’s conviction related specifically to a charge of obstructing justice, public attention focused on the audit relationship between Andersen and its major client, Enron Corporation, particularly the actions (and inactions) that had allowed Enron to post spectacular year-on-year earnings and profit growth. As well as examining events leading up to the demise of Andersen, the case provides an opportunity to consider the broader controversy over accounting and corporate governance practices and, more generally, the pressures found within organisations that can foster unethical conduct. The case was prepared from public sources.