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On the 10th January Andersen admitted that they shredded important documents and emails regarding Enron which would have incriminated them (Sridharan et al 2002). This was extremely shocking for the economic world including many auditors, as it was their job to catch out accountancy fraud and mistakes, not to assist companies in committing such crimes.

Arthur Andersen, much like Robert Maxwell were no strangers to controversy. Andersen had experienced a turbulent past leading up to the Enron and Worldcom scandals (Gredier, 2002). They were connected with the Sunbeam scandal in which the Securities and Exchange Commission ordered them to pay $110 million compensation and also the Lincoln savings and Loans Company (Gredier, 2002). The fact that Andersen had been involved in trouble in the past raises a few questions like why did companies continue to use them as auditors?

How could this have been prevented?

One of the policy of Arthur Andersen company was to employ cheaper and less experienced staff and one policy was that senior employees will retired at the age of 56 in order to save money (Brown & Dugan, 2002). There was now drawback for this policy, this policy may have been financially sensible it did mean that experienced staff were being replaced with inexperienced staff, which is a risk for any business.

The Enron fiasco was not the only case with Andersen there was many other case such as Worldcom scandal (Kadlec, 2002). Enron had already been caught up in a similar corporate scandal and companies like Enron continued to use them. Also the fact that the directors of Andersen did not act upon previous mistakes, these mistakes continued to happen. Again the role of Corporate Governance would have played an vital role, however it is difficult to analyse how anybody could have stopped employees from shredding documents. The directors of the company were essentially to blame as they should have known what was happening in their own company. This type of practice is one that is unpredictable however it is largely contributed to the downfall of Andersen.

In a strange turn of events when the Enron scandal was made public Andersen were actually auditing the FBI (Federal Bureau of Investigation) for the government according to Senator, Patrick Leahy (2002), who was the chairman Judiciary Committee.

Impact of Arthur Andersen

Arthur Andersen once employed 85,000 employees however now they only employ 200 employees who only look after legal claims following the scandal which ruined the company (Wall Street Journal, 2005).

The corporate scandals which Andersen were involved in cost them dearly as highlighted below in some of the compensation claims:

Waste Management 75,000,000.00

Sunbeam 110,000,000.00

Boston Market Bankruptcy 10,300,000.00

Baptist Foundation, Arizona 217,000,000.00

(Wall Street Journal, 2002)

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