Arthur Andersen: From Uncompromising Honesty to the Enron Collapse

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Arthur E. Andersen was orphaned at 16, worked as a mail boy in Chicago, studied at night, and in 1908 became the youngest certified public accountant in Illinois. The firm he co-founded in 1913 rested on a motto inherited from his mother: think straight, talk straight. He insisted that an auditor's real boss is the public investor, not the company paying the fee, and he built the profession's first centralized training program to make that standard uniform across every office.

This episode traces how that culture came apart after his death in 1947. A booming consulting practice outgrew the audit side, and a decade of infighting ended in a split that created Accenture. Left without its economic engine, the audit firm bent to its clients, signing off on Enron's shell company accounting and sidelining a partner who objected. When Enron fell, shredded documents led to a 2002 conviction for obstruction of justice that destroyed an 89 year old firm and nearly 28,000 jobs.

• When a railway executive demanded he approve manipulated books, Andersen replied that there was not enough money in the city of Chicago to make him sign. He was fired, and the railroad went bankrupt months later.
• The firm's staff were so uniform in training and discipline that industry insiders nicknamed them the Arthur Androids.
• In August 2000 an arbitrator let the consultants leave in exchange for the family name and 1.2 billion dollars held in escrow. Audit chief Jim Wadia resigned four hours later because the board had wanted at least 4 billion.
• Partner Carl Bass repeatedly warned that Enron's accounting was an illusion. After Enron executives complained, Andersen removed him from oversight of the account.
• In 2005 the Supreme Court unanimously overturned the conviction over flawed jury instructions, but by then only about 200 employees remained.