Arthur Anderson Is Considered One

Arthur Anderson is considered one of the "Big Five" accounting firms that are at the heart of American corporate finance. Although Anderson had gained a reputation as one of the most trustworthy and respectable accounting firms within the nation from its inception until the late 1970s, its recent mix with high profile accounting scandals has deeply tarnished their image. However, to paint Arthur Anderson as the perpetrator of many of its accounting scandals such as its involvement in both Enron and WorldCom would be unfair. The changing nature of accounting practices and complexities of the financial world has made it extremely difficult to maintain complete integrity while providing value added services for clients. One ethical issue that Arthur Anderson continues to deal with is the compromise between client-firm privacy and accountability to the public sphere. The below analysis will examine how Arthur Anderson struggles with this problem and its proposed solutions on a management level.

On June 15, 2002, Anderson was convicted of obstruction of justice for shredding documents that were related to the audit of Enron. Two managers were fired and cited responsible for the incident, and although the case was actually overturned by the Supreme Court, there is a continual taint associated with the Anderson name. The ethical issue involved in this case is about the issue of client confidentiality. Enron as well as WorldCom and several other companies pressured Anderson to keep certain files confidential in its audit, and although at the time, Nancy Temple of the Anderson Legal, believed that such practice was ethically manageable, it is evident that the public believed otherwise. The ethical issue of client confidentiality is a central one within finance; this is because much confidential documentation regarding long-term corporate strategy has a tradition of being secret. However, in the wake of Enron and WorldCom, and the passage of the Sarbanes-Oxley Bill it is now the responsibility of all corporations to be transparent as possible. The affect on Anderson management has been profound; they now have a permanent Chief Security Officer, with the focus of her research on the development of security protocol and client protection. The ultimate role of Anderson's management is to create a system that allows clients to feel that their overall financial strategy is being protected while still being within the limits of Sarbanes-Oxley and new legislation demanding corporate transparency. There are many ethical issues with skirting the delicate line between corporate privacy and transparency, and as a result, there has been an extreme strain upon Anderson management to find a compromise. Management has begun dealing with this specific problem by examining in detail its current practices and creating extremely strong protocol that will be followed on a large scale level within the entirety of the organization.

There are three primary factors that influence the company's current strategic, tactical, operational and contingency planning. The first factor is the increase in competitiveness within the industry in general. The rise in private and small scale CPA practices within the United States now makes almost all of Anderson's clients institutional in nature. Although this is sustainable at the current level, the concern is that Anderson will not be able to grow its organization at a grassroots level. The implication is that if small to midsized companies are now employing private companies and individual CPAs rather than large accounting corporations, then Anderson must compete exclusively with the other four major corporations for large-cap companies. This is a strategy concern that has influenced Anderson's current tactical decision making. As a result, it has jettisoned many subsidiary operations in order to focus on its core auditing and financial services offerings. This was represented by the spin-off of Anderson Consulting in 2000 into Accenture, and the slow increase in focus on its core business development.

Another major factor that has influenced the company has been the increased complexity of financial legislation. This can be evidenced in several areas; the most prominent is the recent Sarbanes-Oxley Act. This act was passed in the wake of Enron in order to create greater accountability for public companies. As a result, it means that it is harder than ever to become public in the United States. This means that there is much more business for the major accounting companies, and Anderson has begun positioning itself as one of the key industry leaders in helping companies become public entities.