Case Analysis – Individual-1: Waste Management, Inc

Case Analysis – Individual-1: Waste Management, Inc.

Waste management, Inc is a waste management, comprehensive waste, and environmental services company in North America which is founded by cousins Dena Buntrock and Way ne Huizenga in 1894. Through acquisitions and operations, WMI had become the largest waste management company in the United States in 1990. However, the strong growth also brings some negative effects. When the company’s growth was slowing down, Dean Buntrock and his associates began to manipulate tht company’s financial reports in order to keep its appearance of success and try to keep their stock price increase.

Q1: Why didn’t Arthur Andersen stand up to WMI management?

Arthur Andersen was one of the largest accounting firms in the United States and became the company’s auditor throughout this period. During 1992 to 1996, Arthur Andersen and its partners help WMI’s senior officers to manipulate company’s financial report in order to meet the target. They employed a multitude of improper accounting practices to achieve this objective.

In my opinion, the reason why Arthur Andersen didn’t stand up to WMI management is because the firm having a conflict of interest and a lack of independence when auditing a client’s financial statements. In this case, the firm chooses their own interests rather than other group and organization’s interests. Secondly, the concept of independence allows the auditors to carry out their work freely. Independence is needed from individuals that would have an interest in the results published in financial statements of a company. A lack of independence because Arthur Andersen’s consulting services division created a serious conflict of interest. As the result, Arthur Andersen paid a fine of $7 million and the largest accounting firms had to close its doors in 2002 after 90 years of business.

Q2: What aspects of their risk management model did the Arthur Anders en partners incorrectly consider?

The biggest...