Arthur Anderson LLP

Arthur Anderson LLP Business Model Many conscientious and assiduous business professionals presuppose that success is determined principally by their capacity to offer products and services, meet customer demands and requirements, and run their operations using effective and efficient techniques.Advertising We will write a custom critical writing sample on Arthur Anderson LLP specifically for you for only $16.05 $11/page Learn More However, in today’s dynamic, networked, and ever changing business environment, the business model has become a central tool of trade since it is inseparable from the product, process and operational approaches of a business enterprise in shaping how success is realized (Chesbrough, 2006, p. 18). More often than not, the difference between success and failure is thinly veiled in the type of business model adopted by an organization. Before its uneventful entry into questionable deals and fraud charges, Arthur Anderson LLP’s business mod el revolved around the concept of ‘thinking straight and talking straight,’ as proposed by its founder, Arthur Andersen (Smith Quirk, 2004, p.93). According to the case, the organization’s business model was founded on three fundamental tenets – honest accounting, elimination of conflicts of interests, and accountability to the investing shareholders rather than the organizations they audit. This rational plan helped the public auditing firm to generate and capture value in terms of increased revenue and clients during its heydays. Strategy A good business model can be enhanced by the right mix of business strategies. A strategy goes beyond a business model to secure an organization’s competitive advantage in the market, hence success (Chesbrough, 2006, p.26).Anderson’s business model had dictated the â€Å"standards for honest and law abiding accounting,† (Smith Quirk, 2004, p. 93).Advertising Looking for critical writing on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More This had enabled the firm to gain confidence and trust from the public to a point where it adopted the strategy of diversifying its products through market segmentation by coming up with a management consulting arm of the firm. The organization also utilized an expansionist strategy to keep up with industry trends and beat stiff competition from other firms offering the same products such as Delloitte and KPMG (Squires et al, 2003, p. 43). The strategy of segmenting products worked against the firm, and indeed against the founder’s strategy of a ‘one-firm’ philosophy, after the consulting arm of the organization disembarked from the parent company to form Accenture. Team building, morale raising and yearly training programs forms a cluster of other strategies practiced by Anderson’s to sharpen its focus in the market (Smith Quirk, 2004, p. 93). Strategic Dilemma An organization’s strategic plan is as important as its business model, and is fundamentally important for the organization’s success. The use of ineffective or fraudulent strategies heralds an era of difficulties and legal tussles as it can be witnessed through Anderson’s case. In business terms, the firm’s descent from conscience-oriented and honest accounting maestro to a disgraced organization accused of obstructing justice is not an issue that happened overnight (Squires et al, 2003, p. 67). Rather, it originated from a succession of management misrepresentations and compromises on genuine accounting principles over the decades to limit the stream of professional fees charged on Enron for services rendered from drying up.Advertising We will write a custom critical writing sample on Arthur Anderson LLP specifically for you for only $16.05 $11/page Learn More The demand for the auditing partners to boost pro fits became intense after the organization expanded from a closely aggregated partnership of professionals sharing the same values to a global behemoth (Squires et al, 2003, p. 27). The management of the audit firm responded by forcing accounting partners to turn into salesmen, inarguably upsetting the fragile balance between safeguarding the interests of the public investors and satisfying the needs of a client, in this case Enron’s fraudulent needs. Ethically, the firm’s profits over professional services strategy matured into a rather insurmountable situation, where the management was caught in between a rock and a hard place. By turning a blind eye to the happenings at Enron, the auditing firm had committed it self to an ethical dilemma between what its values, business model, and strategies stood for on the one hand and what they were actually doing in practice on the other. The firm was supposed to be guided by a policy of openness and conformity to set rules and guidelines yet it was busy concealing vital information by shredding and deleting important files (Smith Quirk, 2004, p. 103). Also, on numerous occasions, the firm had breached fundamental ethical issues concerning conflicts of interests. The Pros and Cons of the Entire Debacle The failure by Andersen to draw a line between safeguarding the interests of the shareholders and gratifying the whims of its clients marked the departure point for the firm’s legal woes. In taking this line of thinking, the management must have been guided by the desire to generate more profits and kickbacks rather than the aspiration to offer quality auditing services. Consequently, profit was advanced over reputation. In this respect, Andersen stood to gain more profits by turning a blind eye on the fraudulent and corrupt nature of financial transactions and underhand dealings committed at Enron.Advertising Looking for critical writing on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More However, the firm did not imagine the nature and magnitude of its shady dealings with the energy giant. Its reputation as a credible public auditing firm was at stake, and so was its survival as auditing firms thrives on their ability to gain and maintain public trust and confidence. The firm could not escape the public wrath either due to the fact that it was principally charged with the responsibility of detecting fraud by virtue of being Enron’s auditors for over 16 years (Smith Quirk, 2004, p. 101). The Consequences Andersen suffered irreversible consequences due to its underhand dealings with Enron. The public confidence and trust that the firm enjoyed over the decades was completely swept away within days after the shocking revelations judging by the way its shares price plummeted in just a matter of days. After the deception allegations were made public, the organization suffered yet again through the loss of major clients and key members of staff who felt that the cr edibility of the organization had been compromised by corrupt senior managers. Their insatiable appetite of profit over reputation heralded a major accounting scandal. Due to its unprofessional accounting practices despite being in the know, the firm was found guilty of obstructing justice by a Houston federal court, effectively sounding the death knell of one of most prominent public accounting firms the world has ever witnessed (Smith Quirk, 2004). Indeed, the account of the eventful birth and sad demise of the organization is loaded with critical lessons for managers and auditors – that the policy of openness and equal application of professional standards is the only way to go (Squires et al, 2003, p. 56). Reference List Chesbrough, H. (2006). Open Business Models: How to thrive in the new innovative  landscape. Harvard Business Press. ISBN: 1422104273 Smith, N.C., Quirk, M. (2009). From grace to disgrace: The rise and of Arthur Andersen. Journal of Business Ethics Ed ucation, Vol. 1, Issue 1, pp. 91-130 Squires, S.E., Smith, C.J., McDougall, L., Yeack, W.R. (2003). Inside Arthur Andersen:  Shifting values, unexpected consequences. FT Press. ISBN: 0131408968