1. For nearly 90 years, Andersen had a culture of doing the right thing. Moral courage defined the organization. However, there was a gradual erosion of the culture. Name three cultural changes that contributed to Andersen’s problems and defend your position.
The first cultural change was that Andersen embarked on a path that valued consulting service which charged hefty fees ahead of auditing in 1990s. Compared to its original major service, auditing that required accountants to insist independence of judgment, consulting should cater to clients’ requirements and fix problems from client’s perspectives. The situation that two roles mixed in Andersen made top managers decide to sell more consulting service which earned higher profits.
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The Department of Justice issued the indictment against Anderson for obstruction of justice because the firm had publicly admitted to destroying documents associated with the Enron account. As Enron was getting investigated for overstating earnings for several years and for questionable partnerships, the investigations turned to Anderson because as Enron’s auditors they had signed off on all these faulty deals. When Enron’s shoddy deals had finally been exposed to the public and the media, they were in the midst of declaring bankruptcy. For year, Anderson auditors had been signing off on overstated profits and shady partnerships, the Fed decided to open up an investigation on Anderson. When Anderson’s top management realized that the fed was about to begin an investigation on them, employees were “suggested” to shred piles of documents and emails from the Enron case that could have been used as evidence against them in court which was a huge felony. Moreover, investigations on Enron exposed Anderson employees of aiding and abetting the fraud that existed in Enron. The Department of Justice issued the indictment because this wasn’t the first time Anderson was involved in these embarrassing scandals, they had already been through it with Waste Management and Worldcom. The Dept. of Justice knew that after the criminal indictment was issued, Anderson would have to cease its operations because they were “punishing” Anderson for standing by Enron