Cover image for Inside Arthur Andersen : shifting values, unexpected consequences
Title:
Inside Arthur Andersen : shifting values, unexpected consequences
Author:
Squires, Susan E. (Susan Elaine)
Publication Information:
Upper Saddle River, N.J. : FT Prentice Hall, [2003]

©2003
Physical Description:
xvii, 185 pages ; 24 cm
Language:
English
Corporate Subject:
Subject Term:
ISBN:
9780131408968
Format :
Book

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Summary

Summary

The authors bring their unique insights to a close-range observation of Andersen's culture that has continued for more than 15 years. They first review Andersen's unique history and role; its traditionally careful attention to "enculturing" new employees via mentoring, social networking, rewards and punishments; and its social structure characterized by personal, "familial" relationships. Next, they narrate two decades of change at Andersen, showing how the firm's tightly integrated cultural system gradually began to devolve, rapidly coming apart in the wake of the 1990s new economy revolution. The book concludes with an insightful discussion of the systemic cultural and business factors that placed Andersen and many other organizations at risk, along with a realistic assessment of the proposed reforms.


Author Notes

Cynthia J. Smith worked in the Management Development Group in Arthur Andersen's Center for Professional Education and Development. She also worked at World Headquarters on cultural risk management and onsite with engagement teams in Asia developing improvements in high risk and international project management
Lorna McDougall has extensive experience in organizational development for major companies and universities in the U.S. and UK. She joined Andersen Worldwide's Performance Consulting group in 1990, where her work included research, organizational planning and development, and cross-cultural training for worldwide delivery for Audit, Tax, and Consulting
William R. Yeack joined Arthur Andersen in 1981, worked on audit engagements, earned his CPA (1983), and was a member of the Management Information Consulting Division, which became Andersen Consulting. He specialized in large, high-risk projects in the utility and financial industries. He held high-level executive positions with international responsibilities that involved ongoing business relations with the firm


Reviews 2

Publisher's Weekly Review

Much has been written about Arthur Andersen and the collapse of Enron, but this book is perhaps the most ridiculous take of all. Packaging itself as an insiders' account of one of the greatest unravelings in memory, this book is instead largely a weak, uninteresting recitation of corporate history. The authors-"former Andersen insiders"-do run through the Enron affair in the first chapter, but with no more of an exclusive approach than any general press reports on the scandal. Some of this section is a defense of Andersen, and how it's exceedingly difficult for an auditor to cut through a client's outright deception. A fair point, and in retrospect, Andersen did take on more blame than it was due. But the book then segues into press release-style tales of the firm's founder and never recovers. It's easy to see why former Andersen employees would want to write a tell-all, but these authors don't tell much of anything. (June) (c) Copyright PWxyz, LLC. All rights reserved


Choice Review

The authors of this volume, all former Arthur Andersen employees in search of an explanation for Andersen's scandalous failure, provide an interesting chronology of the company from its beginnings as a staid and respected public auditing company to its world leadership in the accounting profession and finally to its transformation to an aggressively competitive, global multiservice company. For the writers, the answer lies in the development of an organizational culture and a business environment that ultimately served to destroy Andersen's tremendous success. Although the ten readable chapters are well written, they do not provide any startling revelations; their value is in their ability to provide a brief biographical sketch of the company's 90-year history. ^BSumming Up: Recommended. Public, undergraduate, and practitioner library collections. S. R. Kahn University of Cincinnati


Excerpts

Excerpts

Preface 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. Acknowledgments 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. Excerpted from Inside Arthur Andersen: Shifting Values, Unexpected Consequences by Susan E. Squires, Cynthia Smith, William R. Yeack, Lorna McDougall All rights reserved by the original copyright owners. Excerpts are provided for display purposes only and may not be reproduced, reprinted or distributed without the written permission of the publisher.

Table of Contents

Prefacep. xiii
Chapter 1 Beginning of the Endp. 1
All-Night Shreddingp. 1
Growing Stormp. 4
Enronp. 5
Arthur Andersenp. 10
Andersen on Trialp. 16
In Search of an Explanation: Culture of Greed or Culture Changep. 20
Referencesp. 23
Chapter 2 Honest Beginningsp. 25
Founding Father, Founding Valuesp. 26
Think Straight, Talk Straightp. 31
Ensuring a Quality Workforcep. 33
The Andersen Partnershipp. 35
The Making of a Mythp. 37
Arthur E. Andersen's Legaciesp. 37
Referencesp. 39
Chapter 3 Growth before the Stormp. 41
Growthp. 44
Leonard Paul Spacekp. 45
Expansionp. 49
Consultingp. 53
Balancing Flexibility with Controlp. 54
Referencesp. 57
Chapter 4 Losing Controlp. 59
Control by Divisionp. 61
Division Allegiance and Individual Successp. 63
Balancing Unity and Divisionp. 65
Outside Threatp. 68
Consulting to the Rescuep. 70
Referencesp. 74
Chapter 5 Consulting Revolutionp. 75
Consulting Challengep. 77
Shifting Valuesp. 80
Consulting Revolt--Consulting Coupp. 84
Conflict of Interestp. 92
Referencesp. 94
Chapter 6 Sales Culturep. 95
The Partner Purge of 1992p. 97
Building a Power Basep. 100
Building External Power--Building Client Relationshipsp. 102
The Second Consulting Revolutionp. 106
Shifting Valuesp. 110
Referencesp. 111
Chapter 7 Mistakes in Judgmentp. 113
Conflicts of Interest and the SECp. 114
Baptist Foundation of Arizonap. 118
Sunbeam Corporationp. 119
Waste Management, Inc.p. 120
Risk Managementp. 123
Errors in Judgment at Enronp. 125
Indictment and Trialp. 127
Referencesp. 129
Chapter 8 Unravelingp. 133
Other Side of the World--An "Inside" Perspective from Asiap. 136
Offices Began Slipping Away--An "Inside" Perspective from Europep. 138
Unraveling--An "Inside" Perspective from the Midwestern U.S.p. 141
Closing Up Shopp. 146
Referencesp. 146
Chapter 9 Will Anything Really Change?p. 149
Regulating the Accounting Industryp. 149
Securities and Exchange Commissionp. 150
Highlights of the Sarbanes-Oxley Corporate Reform Act of 2002p. 151
Public Company Accounting Oversight Boardp. 154
New Financial Accounting Standards Board Rulesp. 156
Establishing the Public Company Accounting Oversight Boardp. 159
Backslidingp. 160
Referencesp. 161
Chapter 10 Conclusions: Andersen and Conflicts in the Public Accounting Systemp. 163
The First Twists--Partner Independencep. 165
Another Turn--The Effects of Growthp. 167
Impact of Consulting Servicesp. 168
Andersen Adopts a Sales Culturep. 169
Culture Changep. 171
Wake-Up Callp. 173
Referencesp. 174
Indexp. 177