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Arthur Andersen, Llp And Management Planning

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Arthur Andersen, LLP, violated its legal, ethical, and social responsibilities by compromising the principles of the Independent Auditor. The company failed its legal responsibility when a company official Michael Odom told employees to begin shredding documents relating to the Enron audits, when Arthur Andersen lawyers determined an investigation into their accounting practices by the SEC was inevitable (e.g., Klein and Long, 2002). This impacted management planning by adhering to the company’s retention policy and destroying documents only when it knew these documents were potentially damaging to the company, instead of following the legal guidance that would have prevented the destruction of documents in the face of potential litigation. The company violated its own fundamental ethical responsibilities as an objective auditor when it overlooked and allowed questionable accounting processes, instead of challenging them, even if it meant losing a customer and a valuable source of income. This indicates a failure in management planning, in that the managers of the company allowed themselves and their employees to depart from the company’s original purpose and tarnish its reputation as a fair and honest business, because they allowed the ends (profits) to justify the means (overlooking questionable accounting practices). The company also failed in its social responsibility to further the greater good and minimize public harm when it allowed its reputation be ruined by losing its objectivity during the Enron audits. This resulted in the business laying off tens of thousands of employees and shaking the public’s trust in independent audits. This destroyed any long-term, strategic planning because the company was simply unable to perform its main purpose.

One of the most far-reaching factors that will impact all levels of planning for Arthur Andersen, LLP, is the effect of the scandal on public perception. Arthur Andersen was involved in the two largest corporate bankruptcies in the history of the United States: Enron and Worldcom. The fallout was not just limited to the companies who were at the center of the scandal, but their respective industries, and the economy as a whole. It had a more significant impact on the accounting firms who audit public companies. The public seems to always have had a suspicion that accountants were able to hide bad information and inflate stock prices, and these events have proven them right. Thus, Arthur Andersen’s strategic goals need to be focused on rebuilding public trust and increasing its customer base once more. At the tactical level, the company needs to put procedures in place to ensure a fair and objective report for each and every company it audits. It needs to organize a public relations department that can begin focusing on remarketing the company’s image. At the operational level, it needs to change everyday tasks to create a transparent view into the company, and establish new ethics training for all employees. Its contingency planning also needs to take into account both positive and negative swings in public opinion in regard to themselves and the accountancy sectors. At this stage, the contingency plans must be kept up-to-date, as every action taken by the company will be scrutinized in the eyes of the public.

Another factor that will affect planning for Arthur Andersen, LLP, is the loss of its license to practice in several states and its current inability to practice under SEC regulations. The loss of its licenses is very costly, because it cannot perform its one and only function without those licenses. At the strategic level, the company must develop a plan that will address the underlying issues that led to the bans in the first place. It must also seek to reinstate its licenses at the earliest possible time. The tactical



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