Hrm 522 Assignment 3

HRM 522-Ethics and Advocacy for HR Professionals

Dr. Jack Huddleston

February 14, 2014

Arthur Anderson: Questionable Accounting Practices

Abstract

This paper will address and analyze the different ethical issues and the questionable accounting practices that occurred to one of the largest accounting firms in the United States. We will look and review the mandated requirements for legal compliance (from Chapter 4) and determine which requirements apply to the Arthur Anderson case. Then we will discuss how the issues with the Arthur Anderson case may have played out differently if the Sarbanes-Oxley Act had been enacted in 1999. Next we will determine and discuss which elements of the framework for ethical decision making in business (from Chapter 5) played the biggest role in the Anderson case. Explain your reasoning. Lastly, we will discuss how the situations at Arthur Anderson may have played out differently if their senior management had displayed the habits of strong ethical leaders. Provide specific examples to support your response.

Known as one of the Big Five the Arthur Anderson firm was founded in 1913 by Arthur Anderson and his partner Clarence Delany. The company name was very synonymous for their integrity, ethics and trust, which is necessary for an accounting firm to have and stand by. Our textbook states, “Anderson set standards for the accounting profession and advanced new initiatives on the strength of its then undeniable integrity (pg. 348). Anderson once shown a strong character but with the rise of many high-profile companies filing for bankruptcy, that same character would come into question.

Analyzing the Sarbanes-Oxley Act was enacted by U.S. Congress in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations. We will look at this act and the legal compliance that it requires and see how this act could have prevented many of the questionable accounting practices that the...