Question

Please review the following and answer the questions at the end: In the early 2000s Arthur Anderson (a major accounting firm at the time) was forced into bankruptcy due to actions they took that violated ethical principles associated with their client Enron (Overview of Enron’s Collapse). Anderson’s role in Enron and their failure to separate financial consulting from accounting practices helped contribute to a major act of reform known as the Sarbanes-Oxley Act of 2002 (SOX) which is considered one of the most sweeping and comprehensive legislation concerning oversight of financial reporting and corporate governance ever legislated. Many executives of American companies believe SOX went too far and has placed an unreasonable burden on American companies placing them in a competitive disadvantage with foreign competitors. Some have called for overturning or at least modifying the more punitive aspects of SOX. After familiarizing yourself with Arthur Anderson’s role in Enron and Sarbanes-Oxley

answer the following questions:

1. Did Arthur Anderson accountants violate any FASB standards and if so which ones?

2. What has SOX done to help ensure a situation like Enron is not repeated?

3. Did SOX go too far and what revisions would you recommend?

4. Accounting as an industry is considered one of the most widely scrutinized fields and thought of as historically highly ethical. What does a situation like Arthur Anderson and Enron teach us about professional ethics and human behavior?

Answer 1

1.Yes.

Arthur Anderson accountants violated ethical principles associated with their client Enron. Enron and their failure to separate financial consulting from accounting practices helped contribute to a major act of reform known as the Sarbanes-Oxley Act of 2002 (SOX).

2. SOX went too far and has placed an unreasonable burden on American companies placing them in a competitive disadvantage with foreign competitors.

3.SOX has to amend or improve their regulation.

4. Every business should be in eco-friendly . Business organisation should act in ethical and professional behaviour.