Arthur Andersen

From Academic Kids

Arthur Andersen LLP, based in Chicago, Illinois, was the fifth largest of the Big Five accounting firms and performed auditing, tax services, and consulting. In 2002 the firm voluntarily surrendered its Certified Public Accounting firm licenses in the U.S. as a result of prosecution by the U.S. Department of Justice.

One of the few revenue-generating assets that Andersen still has is The Q Center (, a conference and training facility outside of Chicago.




Arthur Andersen was founded in 1913 by Arthur Andersen and Clarence DeLany as Andersen, DeLany & Co. The firm changed its name to Arthur Andersen & Co. in 1918.

Arthur Andersen's first client was the Schlitz beer company of Milwaukee.


Andersen, who headed the firm until his death in 1947, was a zealous supporter of high standards in the accounting industry. A stickler for honesty, he argued that accountants' responsibility was to investors, not their clients. Leonard Spacek, who succeeded Andersen at the founder's death, continued this emphasis on honesty. For many years, Andersen's motto was "Think straight, talk straight."

By the 1980s, however, standards throughout the industry fell as accountants became unwilling to upset their clients. Andersen was no exception. Andersen has been alleged to have involved in the fraudulent accounting and auditing of Sunbeam, Waste Management, Asia Pulp and Paper, and the Baptist Foundation of Arizona, among others.

Relationship to Accenture

Arthur Andersen realized, before the rest of the Big Five, that business consulting was a very lucrative business. In 1989, Arthur Andersen and Andersen Consulting became separate units of Andersen Worldwide. Andersen began using its accounting services as a springboard to sign up clients for Andersen Consulting's more lucrative business.

The two spent most of the 1990s in a bitter dispute. Andersen Consulting saw a huge surge in profits during the decade due to the business being steered to it by Arthur Andersen. However, the consultants felt they were being underpaid. In 2000 an international arbitrator granted Andersen Consulting its independence.

As a result of that split, Andersen Consulting was forced to change its name to Accenture on New Year's Day 2001. Accenture agreed to pay $1.2 billion in past payments to the accounting firm.

Accounts vary on why the split occurred — executives on both sides of the split cite greed and arrogance on the part of the other side, and executives on the AC side maintained breach of contract when AA created a second consulting group, AABC (Arthur Andersen Business Consulting) which began to compete directly with AC in the marketplace.

Involvement in accounting scandals

On June 15, 2002, Andersen was convicted of witness tampering for shredding documents related to its audit of Enron. Since the Securities and Exchange Commission does not allow convicted felons to audit public companies, the firm agreed to surrender its licenses and its right to practice before the SEC on August 31.

On May 31, 2005, the Supreme Court of the United States unanimously overturned Andersen's conviction due to flaws in the jury instructions. In the court's view, the instructions allowed the jury to convict Andersen without proving that the firm knew it broke the law or that there was a link to any official proceeding that prohibited the destruction of documents. The opinion was also highly skeptical of the government's definition of "corrupt persuasion"--persuasion with an improper purpose even without knowing an act is unlawful.

Despite this ruling, it is highly unlikely Andersen will ever return as a viable business. The firm lost nearly all of its clients when it was indicted, and there are over 100 civil suits pending against the firm related to its audits of Enron and other companies. It began winding down its American operations after the indictment. From a high of 28,000 employees, the firm is now down to around 200 based primarily in Chicago. Most of their attention is on handling the lawsuits.

See also

External links




Academic Kids Menu

  • Art and Cultures
    • Art (
    • Architecture (
    • Cultures (
    • Music (
    • Musical Instruments (
  • Biographies (
  • Clipart (
  • Geography (
    • Countries of the World (
    • Maps (
    • Flags (
    • Continents (
  • History (
    • Ancient Civilizations (
    • Industrial Revolution (
    • Middle Ages (
    • Prehistory (
    • Renaissance (
    • Timelines (
    • United States (
    • Wars (
    • World History (
  • Human Body (
  • Mathematics (
  • Reference (
  • Science (
    • Animals (
    • Aviation (
    • Dinosaurs (
    • Earth (
    • Inventions (
    • Physical Science (
    • Plants (
    • Scientists (
  • Social Studies (
    • Anthropology (
    • Economics (
    • Government (
    • Religion (
    • Holidays (
  • Space and Astronomy
    • Solar System (
    • Planets (
  • Sports (
  • Timelines (
  • Weather (
  • US States (


  • Home Page (
  • Contact Us (

  • Clip Art (
Personal tools