Read an Excerpt
The fall of Arthur Andersen—one of the five largest accounting firms in the world—was as much a shock to its 85,000 worldwide employees as it was to the business community and the general public. Except for the Enron engagement team, those inside the global firm knew little about its association with Enron. Most first learned from the media of the Andersen felony indictment for obstructing a federal investigation. Even then, it was inconceivable to most Andersen employees that the entire firm, with offices all over the world, could be affected so profoundly. Within days, desks were being packed, families relocated, whole offices parcelled off. Everyone was left looking back at what had been. The story is poignant, not just because it affected the lives of those inside but because it has a message for businesses today in all sectors. The changes inside and outside the firm that led to actions so out of character for the company's founder, Arthur E. Andersen, are changes that can and will affect other companies, perhaps yours.
The mission of this book is to tell what happened, as seen from inside—before, during, and after—to those who are not insiders of Arthur Andersen or the accounting industry, and provide insights for those who were insiders. The authors, Susan E. Squires, Cynthia J. Smith, Lorna McDougall, and William R. Yeack were all employed by Andersen and bring over 26 years of collective experience with the firm to the Andersen story. The book's tale is of a firm that changed as competition among the big accounting firms became aggressive. To survive and prosper, Andersen changed and adapted in ways many firms today are changing and adapting. From the days of Arthur E. Andersen's original public accounting firm that provided honest audit service, the firm became a dynamic, sprawling, more aggressive multiservice organization with clients willing to skate ever closer to the edge of risk. This book chronicles key decisions that led to changes in Andersen's culture and the external and internal factors that led to events that would have been unlikely—even impossible—only a few years before.
The story begins as Arthur Andersen goes to trial, then recounts the sequence of events that brought the firm to court—the day things turned ugly—the media coverage of the shredding, and the fall of the first of several dominos that would eventually topple Arthur Andersen.
You will get the inside view from several perspectives of the firm. What was it like to work at Arthur Andersen? How did the company grow from a small accounting firm dominated by one individual to a global firm that was the largest of its kind in the world when it became Enron's auditor? You will understand the long chain of events that eventually caused Andersen to fall. These events shed light on the role of accounting in the American economic system and on current concerns. In the end, you can consider what this means for you and perhaps for your company.
About the Authors
Arthur Andersen is a unique case to which analysis of the organizational culture can be applied. All authors are Andersen "insiders" who were participants and observers within the Andersen organization and are able to share a factual business picture, as well as a very human face of the firm's story. Three of the authors of this book are cultural experts who held positions at the firm. Based on their understanding and first-hand experience, the authors are able to shed light on events and core values of the legendary Andersen culture and how they were transformed over time, especially from 1981 to 1997, the time span of their experience.
Dr. Susan E. Squires was at Andersen Worldwide's Center of Professional Development from 1993 to 1997, working with both Arthur Andersen and Andersen Consulting as an evaluator and cultural consultant on internal and external teams.
Dr. Lorna McDougall was a cultural consultant at Andersen Worldwide, conducting research and working on long-term human resources and organizational learning for the Audit, Tax, and Consulting divisions in the U.S. and the UK.
Dr. Cynthia J. Smith, an anthropologist, began working with the firm in 1982, creating the first position for an anthropologist in the Management Development Group at Andersen's Center for Professional Education and Development in St. Charles, Illinois.
William R. Yeack's responsibilities for large multinational, high-risk projects within the firm and as a private sector executive add a front-line professional perspective to the book. William Yeack and Cynthia Smith worked closely together on cultural research projects in the firm, developing high-risk and international project cultural risk management improvements.
Many people helped us with this project. We owe thanks to the many members of the Andersen family who lent us their support, to senior members of the firm in the U.S. and UK for generously sharing their perspectives, and to all the Arthur Andersen alumni for their thoughtful interviews. We want to thank James Brennan for his generosity in terms of time and effort to help us with the interview phase of the project. All of those we talked with added immeasurably to our understanding, and without them this story might be very different.
We would like to express our deep gratitude to our editor, Jim Boyd, for the unusual opportunity to write as a team and for his invaluable insights and guidance throughout this project.
We thank Russell Hall for his editorial support and for his cheerful encouragement as we worked through the many possible approaches to writing.
We must thank Mitchell Lear for suggesting that we write this book and Dr. Leonard Sayles and Kathy Ripin for their help in thinking through the project. They gave generously of their time and advice.
We especially thank retired partner, Thad Perry, for taking an interest in the research and development projects proposed by William Yeack and Cynthia Smith when they all worked together in the early 1980s. Mr. Perry had the management courage to give permission and support for our work.
Thanks also go to Dr. Daniel Jensen, Director of the Accounting Hall of Fame at Ohio State University, who took time to engage in a most interesting and helpful discussion of recent events in accounting from his perspective as a historian of the accounting profession.
We would also like to thank those who helped us with research for the project. Elaine Lowell and Gabrielle Cooney provided help with some of the background. Brian Hickam and Tim Burns, reference librarians at Ohio State University-Mansfield Library, were extremely helpful and creative about tracking down sources.
It is important that we thank Marilyn Taillon for her Andersen insights and Kate Cox for her guidance in reorganizing the original manuscript. Bryan Bryn deserves our thanks for helping to tighten the book's conclusions.
Our families have been unfailingly supportive while we thought about and undertook the writing task. We want to express our appreciation for all the concessions our families and friends have made and for their support during our work on the book.
Lucy, Susan's dog, deserves special thanks for sitting so patiently by her desk while she wrote and rewrote instead of going for walks.
Because the firm no longer exists, for all intents and purposes, it has been difficult at times to verify information. Although we have made every effort to check points of accuracy, the authors take responsibility for any errors. When we found discrepancies in details recounted in the media, we attempted to check the facts with former Andersen partners or to decide which sources we believed to be more reliable. The story of Andersen and Enron is still unfolding, and a great deal of litigation is still outstanding against the firm, which makes it difficult for Andersen people to discuss certain topics.