Unit 5 Org. Arch III Threaded Discussion Corporate Governance & Arthur Andersen, LLP Your text includes a Capstone Case Study on organizational architecture as an Appendix to Chapter 17, "Divisional...

Threaded discussion: Unit 5 1
Unit 5, threaded discussion
Threaded discussion: Unit 5 2
Arthur Andersen LLP and corporate governance:
Discuss the environmental, strategic, and organizational changes that occu
ed over
the life of Andersen in the context of Figure 11.1
The business environment as well as the strategy of Anderson has changed in a material
ways with a strong focus on the different changes in the organizational architecture in respect to
the decision aspect, performance evaluation and reward system. One of the major reasons for the
demise of the Anderson Company can be given to the inappropriate organizational architecture.
The company came into existence in 1914 with a strong focus on offering high quality
accounting services to the clients, with a strong focus on integrity as well sound auditing options.
The external environment in respect to financial reporting changed the aspects of the business. In
1930’s the federal government had kept forward regulation as per which the public companies
needs to submit their financials helped the accounting industry and Andersen, with the
advancement in technology, in 1950’s automated and advanced accounting systems were
introduced. In 1970’s with the advancement of information technology, the organizations
strongly focused on consulting outside firms for accounting and auditing which highly affected
the consultancy firms.
The company has a strong focus since its inception on integrity and high quality service.
In 1947 the company focused on using soft elements approaches like folklore so as to develop
ability to signal employees on behavior and successes.
The organizational architecture of the company till 1980’s was centralized and was
operational through Professional Standard Group which focused on consistency. In 1990’s the
company shifted its focus and strategy to minimize the cost and increase its profits, the
employees who focused on providing added profits and business to the firm were rewarded. With
Threaded discussion: Unit 5 3
a focus on this strategy started using diverse ways so as to gain profits for the firm. The
company was not working as per the set strategy of the company, just to gain profits, the
integrity of the firm was sacrificed by providing internal bookings and internal auditing basically
creating a system where no checks and balances existed or at least where they could be easily
manipulated. This highly affected the culture of the company, as well as the core values on
which the company was rising.
Evaluate Andersen’s claim that their problems on the Enron audit were due to a few
“bad partners” in the organization. If you disagree with this claim, discuss what you think
were the root causes of the problem
I do not agree with the claim that was put forward by Andersen, Enron has followed false
accounting practices under the accounting firm Arthur Andersen. Enron was quite aggressive in
eporting its accounting, majorly Raptor and Candor vehicle transactions. The main accounting
scandals that were refe
ed by Watkins were Raptor and condor Vehicle reporting. The company
was focusing on hiding its losses as the Raptors’s stock value had decreased incredibly. To show
profits, the company manipulated its operating expenses and income to show high operating
profits to the investors. The equity derivate transactions were not shown properly in the accounts.
Enron followed immoral and unethical actions so as to achieve personal profits. Enron focused
on creating constellation of partnership so as to shits its losses and debts. The first fraudlant
accounting practice that was adopted by Enron was using ghost companies i.e (SPEs) these were
special purpose entities which was used by Enron to finance the purchases of Enron and these
transactions were kept off the accounting book. This practice was used by Enron to show
extraordinary profits so...