{ "media_type": "text", "post_content": "I want to understand why was Arthur Anderson kicked out of the audit business. I know they played a major part in the Enron scandal. But still these days we are seeing scandals happening. Someday we see EY name popping (Wirecard) KPMG or some other Big 4 but we still hold a strong position in the market. Then why didn't Arthur Anderson in accounting and audit business especially what I have learnt that it was largest among the big 5 at that time?", "post_id": "60fb184c384aca0022413372", "reply_count": 14, "vote_count": 2, "bowl_id": "552d1d24dc1c586b09d2d051", "bowl_name": "Consulting" }

I want to understand why was Arthur Anderson kicked out of the audit business. I know they played a major part in the Enron scandal. But still these days we are seeing scandals happening. Someday we see EY name popping (Wirecard) KPMG or some other Big 4 but we still hold a strong position in the market. Then why didn't Arthur Anderson in accounting and audit business especially what I have learnt that it was largest among the big 5 at that time?

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The SEC lost a Supreme Court case for being too heavy handed in their punishment of AA. With that said, I think (but don't know the details) that AA was more complicit in what was going on with Enron and committed obstruction of justice when they started to shred documents once Enron was collapsing.

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Speaking for EY re: wirecard there are a couple reasons the firm has been relatively unscathed: 1) No legal determinations have been made. All accusations of auditor misconduct are still just accusations. 2) EY is a collection of many local/national firms, so I don’t believe EY US for example would bear the legal responsibility of actions conducted solely by EY Germany. These two facts certainly don’t mean that EY isn’t taking a reputational hit from wirecard and other scandals, but a judgement barring them from auditing globally almost certainly isn’t in the cards.

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The evidence for very explicit bad behavior at high levels of the firm was quite strong causing the SEC to revoke their license in the US. I’m not sure if they had any international partner firms and if so what happened to them.

It was a sad time. I really enjoyed working for AA and the people were great, except for those few.

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WoW you were working for AA.

Now Arthur Anderson repping Protiviti

My understanding is that after the Enron scandal and punishment from the SEC, their reputation was so tarnished that they ceased to be an effective business. Basically they became persona non grata in the audit world. There may be more to it, but I think that’s the main reason.

The punishment didn't fit the crime. Andersen essentially got the death penalty because two partners told a bunch of associates to shred documents. There was no reason for a storied firm of 85,000 people to implode over the actions of two misguided people. The Supreme Court later overturned Andersen's conviction, but it was too late for the firm to recover from the reputational damage.

Quite a few of the practices were bought eg EY merged with 60pc of the AA practices globally, in places like France

AA had their license reinstated but by that time the damage was irreparable.

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