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1. Why is it important for accounting professionals to understand Accounting Information Systems from an ethical perspective?

2. How can ethical education impact accountants in an AIS environment?

3. How can ethical education impact AIS auditors’ practice behaviour in an AIS environment?

4. Do you think institutions that offer ethical education syllabi can instill a sense of professional ethics, both in thought and action in their students?

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Tod Thiel
Tod ThielLv2
28 Sep 2019

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Case Study - answer the questions on the bottom, 300 or 400 words recieve thumbs up ^^

Once the largest professional services firm in the world, and arguably the most respected, Arthur Andersen LLP (AA) has disappeared. The Big 5 accounting firms are now the Big 4. Why did this happen? How did it happen? What are the lessons to be learned?

Arthur Andersen, a twenty-eight-year-old Northwestern University accounting professor, co-founded the firm in 1913. Tales of his integrity are legendary, and the culture of the firm was very much in his image. For example, “Just months after [Andersen] set up shop in Chicago, the president of a local railroad insisted that he approve a transaction that would have inflated earnings. Andersen told the executive there was “not enough money in the City of Chicago” to make him do it.”1 In 1954, consulting services began with the installation of the first mainframe computer at General Electric to automate its payroll systems. By 1978, AA became the largest professional services firm in the world with revenues of $546 million, and by 1984 consulting brought in more profit than auditing. In 1989, the consulting operation, wanting more control and a larger share of profit, became a separate part of a Swiss partnership from the audit operation. In 2000, following an arbitrator’s ruling that a break fee of $1 billion be paid, Andersen Consulting split completely and changed its name to Accenture. AA, the audit practice, continued to offer a limited set of related services, such as tax advice.2

Changing Personalities and Culture

Throughout most of its history, AA stood for integrity and technical competence. The firm invested heavily in training programs and a training facility in St. Charles, a small town south of Chicago, and developed it until it had over 3,000 residence beds and outstanding computer and classroom facilities. AA personnel from all over the world were brought to St. Charles for training sessions on an ongoing basis. Even after the consulting and audit operations split, both continued to use the facility.

Ironically, AA was the first firm to recognize the need for professional accountants to study business and professional accounting formally. In the late 1980s, AA undertook a number of programs to stimulate that formal education, including the development of ethics cases, the creation of an approach to the resolution of professional ethical problems, and the hosting of groups of 100 accounting academics to get them started in the area. Most had no formal ethics training and were uncertain how to begin ethics teaching, or even if they should. It is likely that AA’s far-sighted policies are responsible for the genesis of much of the professional ethics education and research in accounting that is going on today.

What happened to the AA culture that focused on integrity and technical competence? What changed that would account for AA’s involvement in the major scandals noted on Table 1 as the audit firm that failed to discover the underlying problems?
TABLE 1: Arthur Andersen’s Problem Audits

CLIENT

PROBLEM MISSED, DATE

LOSSES TO SHAREHOLDERS

JOB LOSSES

AA FINE

WorldCom

$4.3 billion overstatement of earnings announced on June 25, 2002

$179.3 billion

17,000

N.A.

Enron

Inflation of income, assets, etc., bankrupt Dec. 2, 2001

$66.4 billion

6,100

$.5 million (for shredding)

Global Crossing

Candidate for bankruptcy

$26.6 billion

8,700

Waste Management*

Overstatement of income by $1.1 billion, 1992–1996

$20.5 billion

11,000

$7 million

Sunbeam*

Overstatement of 1997 income by $71.1 million, then bankruptcy

$4.4 billion

1,700

Baptist Foundation of Arizona

Books cooked, largest nonprofit bankruptcy ever

$570 million

165

Source: “Fall from Grace,” Business Week, August 12, 2002, 54.
*

Cases are in the digital archive for this book at www.cengagebrain.com

Some observers have argued that a change in AA’s culture was responsible. Over the period when the consulting practice was surpassing the audit practice as the most profitable aspect of the firm, a natural competitiveness grew up between the two rivals. The generation of revenue became more and more desirable, and the key to merit and promotion decisions. The retention of audit clients took on an increasingly greater significance as part of this program, and since clients were so large, auditors tended to become identified with them. Many audit personnel even looked forward to joining their clients. In any event, the loss of a major client would sideline the career of the auditors involved at least temporarily, if not permanently. For many reasons, taking a stand against the management of a major client required a keen understanding of the auditor’s role, the backing of senior partners in your firm, and courage.

The pressure for profit was felt throughout the rest of the audit profession, not just at Arthur Andersen. Audit techniques were modified to require higher levels of analysis and lower investment of time. Judgment sampling gave way to statistical sampling, and then to strategic risk auditing. While each was considered better than its predecessor, the trend was toward tighter time budgets, and the focus of the audit broadened to include development of value-added nonaudit outcomes, suggestions, or services for clients. Such nonaudit services could include advice on the structuring of transactions for desired disclosure outcomes and other work on which the auditor would later have to give an audit opinion.

According to discussions in the business and professional press, many audit professionals did not see the conflicts of interest involved as a problem. The conflict between maximizing audit profit for the firm and providing adequate audit quality so that the investing public would be protected was considered to be manageable so that no one would be harmed. The conflict between auditing in the public interest with integrity and objectivity that could lead to the need to roundly criticize mistakes that your firm or you had made in earlier advice was considered not to present a worry. In addition, the conflict between the growing complexity of transactions, particularly those involving derivative financial instruments, hedges, swaps, and so on, and the desire to restrain audit time in the interest of profit was thought to be within the capacity of auditors and firms to resolve. The growing conflict for auditors between serving the interests of the management team that was often instrumental in making the appointment of auditors, and the interests of shareholders was recognized but did not draw reinforcing statements from firms or professional accounting bodies. Some professional accountants did not understand whether they should be serving the interests of current shareholders or future shareholders, or what serving the public interest had to do with serving their client. They did not understand the difference between a profession and a business.

Ethical behavior in an organization is guided by the ethical culture of that organization, by any relevant professional norms and codes, and particularly by the “tone at the top”3 and the example set by the top executives. Also, presumably the selection of the CEO is based partly on the choice of the values that an organization should be led toward. Joe Berardino was elected AA’s CEO on January 10, 2001, but he had been partner-in-charge of the AA’s U.S. audit practice for almost three years before. He was the leader whose values drove the firm from 1998 onward, and probably continued those of his predecessor. What were his values? Barbara Ley Toffler, a former Andersen partner during this period and before, has provided the following insight:

When Berardino would get up at a partners meeting, all that was ever reported in terms of success was dollars. Quality wasn’t discussed. Content wasn’t discussed. Everything was measured in terms of the buck…. Joe was blind to the conflict. He was the most aggressive pursuer of revenue that I ever met.4

Arthur Andersen’s Internal Control Flaw

Given this “tone at the top,” it is reasonable to assume that AA partners were going to be motivated by revenue generation. But if too many risks are taken in the pursuit of revenue, the probability of a series of audit problems leading to increasingly unfavorable consequences becomes greater. That is exactly what happened. Unfortunately, the leaders of AA failed to recognize the cumulative degree to which the public, the politicians, and the SEC were angered by the progression of AA audit failures.

If they had recognized the precarious position they were in, the AA leadership might have corrected the flaw in the AA internal control that allowed the Enron audit failures to happen. AA was the only one of the Big 5 to allow the partner in charge of the audit to override a ruling of the quality control partner. This meant that at AA, the most sensitive decisions were taken by the person who was most concerned with the potential loss of revenue from the client in question, and who was most likely to be subject to the influence of the client. In all of the other Big 5 firms, the most sensitive decisions are taken by the person whose primary interest is the compliance with GAAP, the protection of the public interest, and the reputation of the firm.

On April 2, 2002, the U.S. House Energy and Commerce Committee5 released a memo dated December 18, 1999, from Carl Bass, a partner in AA’s Professional Services Group in Chicago, to David Duncan, the AA partner in charge of the Enron account. That memo asked for an accounting change (believed to be in regard to SPE transactions) that would have resulted in a $30–$50 million charge to Enron’s earnings. In February 2000, Bass emailed Duncan to object to the setting up of an LJM partnership because he indicated that “this whole deal looks like there is no substance.”6 On March 4, 2001, Bass wrote that “then-chief financial officer Andrew Fastow’s role as manager of special partnerships compromised deals Enron made with the entities.”7 Duncan overruled Bass on the first issue, and Bass was removed from Enron audit oversight on March 17, 2001, less than two weeks after he questioned Fastow’s role in Enron’s SPEs. In any other Big 5 firm, Duncan would not have been able to overrule a quality control partner on his own. History might have been different if a quality-focused internal control procedure had been in place at AA, rather than one that was revenue focused.
Arthur Andersen’s Apparent Enron Mistakes.

Questions below

1.

What did Arthur Andersen contribute to the Enron disaster?
2.

Which Arthur Andersen decisions were faulty?
3.

What was the prime motivation behind the decisions of Arthur Andersen’s audit partners on the Enron, WorldCom, Waste Management, and Sunbeam audits: the public interest or something else? Cite examples that reveal this motivation.
4.

Why should an auditor make decisions in the public interest rather than in the interest of management or current shareholders?

Please edit and rewrite the following in YOUR OWN WORDS... sothat it cannot be passed as plagiarism. Also, it needs to passturnitin.com inspection. I am just asking for a very skillfullrewording of this passage that is distinguishably and uniquelydifferent.

What is a CPA?

A CPA, or Certified Public Accountant, is a designation reservedfor accountants in the US who pass the CPA exam. This designationshows an expertise in the field. To become a CPA in the US, astudent must pass the exam and meet other state requirements suchas gaining a certain amount of work experience or furtherededucation. The CPA licenses accountants to provide their servicesto the general public. The CPA designation is taken very seriously,as its requirements maintain that only the most knowledgeableaccounts can qualify. The designation is usually used behind aperson’s name to signify the level of experience, and is often apunishable offense if it is used without actually passing the examand requirements.

The CPA Exam Requirements

International students who want to become an expert inaccounting and achieve the CPA designation will first need to passthe CPA exam. The exam is certainly not easy and tests many of themost important accounting principles. The exam is called theUniform CPA exam, and the eligibility to actually take the examdepends on the exact state the student plans to test in. There arethree main requirements for taking the CPA Exam. They arecategorized as the 3 E’s: Exam, Education, and experience. One ofthe main qualifications to sit for the exam is advanced education.Undergraduate degrees carry 120 credit hours. The CPA exam usuallyrequires 150 credit hours. This means students will have to achieve30 hours of graduate level coursework. It most cases, aninternational student will take the 30 extra hours and thencomplete a few extra classes to earn a master’s degree inaccounting. The exam also tests some of the laws of the stateincluding contract and state laws and often tests the knowledge offederal laws as well. The third requirement to sit for the exam isusually some type of experience in the field of accounting. Whilenot mandatory in all states, some states require that a CPAcandidate have 2 years of work experience in accounting or taxpreparation. Some states only require general experience inaccounting.

Learn What a CPA Does

While the main function is to offer public accounting services,the CPA designation can allow accountants to do many other things.One of the main functions of a CPA is auditing, either for a smallor large business. Auditors go through financial statements andmake sure there are no discrepancies. Many CPAs go on to theexecutive levels for companies, as either CFOs or CEOs. Inaddition, many CPAs work in the tax field working income taxes andfederal and state taxes for small or mid-sized companies. Otherroles of CPAs include financial analysts, financial planners,forensic accountants, Management consulting, estate planning andcorporate finance.

The Many Benefits of Becoming a CPA

Certified public accountants are at the top of their field.Students interested in studying accounting should give seriousconsideration about getting the CPA in the US. In order to grow inan accounting career a CPA designation is almost necessary. Inaddition, CPAs will usually get paid higher. Those with a master’sdegree and CPA will see their salary go up even higher. Inaddition, being a CPA in the US will open the door for so many morecareer opportunities. Accounting professional are a hot commodity,and those with an advanced degree and CPA designation will be onthe top of the list for most employers. Certified publicaccountants in the US have a lot of responsibility, but being atthe top of your field is a great feeling! International studentsinterested in studying accounting will find that becoming a CPA andgraduating with a degree in accounting will allow them to chasethere dream, whatever it may be, because it is such a versatilecareer and skillset.

What types of skills will I need?

To begin a successful career in accounting, you will need todevelop a wide array of knowledge, skills and competencies, rangingfrom a strong understanding of accounting and business concepts toeffective leadership and communication skills. You will also needto have a broad business perspective, which will enable you to "seethe big picture" of the internal and external factors that impacthow a business operates. Technology will also be a major enablerthroughout your career, so it's critical to stay abreast of andutilize new computer applications and systems as necessary.

Problem-solving, analytical and researchskills - You should be able to analyze, compare andinterpret facts and figures. The ability to identify and solveunstructured problems in an unfamiliar setting and provideinsightful consulting advice is a valued quality. Creative thinkingwill help you face issues on a daily basis and generate innovativesolutions. Also, it is essential to be able to effectively andefficiently research, organize and report on technical and/orindustry specific issues utilizing print, electronic or humansources.

Personal skills -Accounting is a service activity, and you will have to work well inteams as well as in one-on-one situations. Critical to anyorganization's success is the ability to lead, motivate and empowerteams to attain clear, concrete, timely and measurable results.

Strong communication skills including the ability tobe a good listener- You will becalled upon to persuasively present, discuss and defend your viewsboth formally and informally, in writing and verbally. Clients andco-workers will present you with issues and questions you will needto interpret and respond to quickly. The ability to show empathyand sensitivity to their situations will position you in afavorable light and earn their respect and trust.

Understand emergingtechnologies- You need to keepcurrent on emerging technologies like e-commerce, image processingand workflow technology, and understand how these impact businessoperations and the use of information for decision making. Youshould know how to use the Internet, e-mail and discussion boards,as well as be familiar with the latest spreadsheet, database, wordprocessing, accounting, and business and presentation softwarepackages.

Broad BusinessPerspective- You need a keenbusiness sense and an awareness of current events, both locally aswell as globally. As a key business partner to clients and/orcompany management, you add value to the organization by makingappropriate recommendations based on your understanding of companyoperations, policies, practices and competitive factors.

What's your feed back after reading this article "Voices: So you’re ready to be an accountant"?

----

Voices: So you’re ready to be an accountant?

Welcome to the accounting profession! As you take your first steps on your hopefully long, prosperous and rewarding career journey, there are some things you should know. Things that are contrary to the lackluster stereotype of CPAs!

Truth be told, accountants are often the most trusted advisors in business, tax and wealth planning. We are the professionals whom leaders of industry turn to for assistance in guiding their businesses through a maze of regulatory issues to profitability; the ones high-net-worth families rely on to develop strategies that create and preserve wealth; and the ones whose knowledge and problem-solving abilities help individuals and organizations realize their goals.

Having spent more than three decades interviewing hundreds of campus recruits and watching young CPAs develop and grow into trusted advisors, I want to share with you 10 truths to guide you on your path to success in the accounting profession.

(For a slideshow version of this,click here (Links to an external site.)Links to an external site..)

Be inquisitive. As a recent graduate, you are not expected to know how to put your knowledge into practice. In fact, most of your new colleagues expect that you will rely on them to learn the ropes. If you have a question, ask it, whether it is how to complete a task, how the laws have changed or how to handle a client challenge. It is better to ask a question and potentially appear uninformed than it is to take action without having the right information. You must still perform research to learn, but do not be afraid to ask for help. Being vulnerable is an essential component to becoming a caring professional with an arsenal of knowledge to advise clients.

Commit the effort to hone your skills. Your education provided you with a solid base upon which you can build a rewarding career in accounting, but there is so much more to learn. Roll up your sleeves and take advantage of every opportunity to acquire knowledge. Enhance both your technical and leadership skills and become a proficient advisor in a practice area or industry where your passion and leadership can shine. The more you learn, the more you increase your chances of becoming a valued and trusted advisor.

Bloomberg News

Get out of your comfort zone and take risks. Avoid complacency and the risk of falling into a routine that keeps you stagnant and impedes your ability to achieve the career you desire. Be open to new people, new ideas and new experiences; share your curiosity; and have fun. You may have planned to be an auditor, but if you are tapped for a valuation project, go with it and see what you can learn. By taking risks, you can step into new opportunities and grow in the process. You have chosen a profession where constant change and challenge are the norm. Embrace every new experience to enhance your career.

Be honest and accountable.As a new professional, you are bound to make mistakes. We will never expose you to more risk than you can handle. If you never make a mistake, you will never learn. Be accountable for your actions and immediately let someone know to help you mitigate any damages. If you attempt to hide the mistake, you compound the problem. Every mistake is an opportunity for you to learn something that ultimately supports your long-term success.

Understand and adapt to the seasons of an accountant’s life. Accountants live and breathe by deadlines. Unlike your time in college, when you could cram a semester of knowledge into a few days before a final exam, you cannot build a career as an accountant by pulling all-nighters. Deadline season is a known factor that you can count on and prepare for in advance. Learn how to smooth out your workflow by taking advantage of non-deadline times to get work done prior to delivery dates. We want you to have a quality life outside the office where personal matters may pop up just when you’re working on deadline. Get it done early.

Collaborate and make friends with your coworkers. With so much of our day spent at work, it is important to develop and nurture relationships with your colleagues. Take advantage of every opportunity to socialize with the people in your office, at every level and in every department. Learn to leverage their expertise to help you with client issues. Introduce them to others at every opportunity. Professionally, your coworkers play a strategic role in moving the firm forward and supporting your development. At all times, treat others with dignity and respect. On a personal level, you may be surprised to find how much you have in common with your coworkers, many of whom will become your closest friends and loudest cheerleaders.

Build your network and cultivate relationships with mentors. Accounting is an apprenticeship profession in which people develop people. Seek out and develop relationships with professionals you admire and who understand this concept. Ask questions and acquire knowledge that will empower you and support your ongoing professional development. We are invested in your ultimate success.

Based on surveys of Accounting Today readers, this web seminar will identify some of their favorite apps from the QB ecosystem, and share how they use them to boost productivity.

Get out of the office and make community a priority. Expanding your network of contacts and experiences outside of the firm is vital in your development as a professional accountant and as a leader. Be strategic in deciding which community, civic and charitable organizations align with your passions, your available time and your goals. Giving back to the community means more than opening your wallet. Give your time, your expertise, your leadership. Start with your network of fellow graduates and make a concerted effort to establish meaningful relationships with professional and community organization where your knowledge and leadership can make an impact.

Build and protect your personal brand.Your personal brand is the reputation you create for yourself based on the things you do and say, both at work and in your personal life. It is how others perceive you, how they remember you and why they should seek you out. Building your personal brand is a deliberate process that occurs over the course of your career. Demonstrating your technical skills will not be enough; you must learn all you can about your clients, their industries and their challenges, and you must demonstrate that you provide the value, attention and nurturing they expect and deserve from a trusted consultant.

Discover your passion and pursue it relentlessly. Keep exploring until you find what you love to do and then do it relentlessly. If you are able to discover what you are passionate about, work will become your calling. Your career will be dedicated to pursuing an expertise that will result in others seeking your counsel. Persevere until you discover your passion, and then just have fun!

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