What Happened to Arthur Andersen?



One of the most notorious names in accounting is ‘Arthur Andersen’ – with the organisation famed for their remarkable collapse. In the process, they instantly became the go-to case study for those aiming to show evidence of a correlation between criminal accounting and an inevitable demise. Yet for a considerable time, Arthur Andersen were one of the most venerable firms in America – and one of the ‘big five’ accounting firms. But, after getting tangled up in the infamous Enron Scandal, Arthur Andersen soon collapsed. So, what happened?


black calculator near ballpoint pen on white printed paper
Arthur Andersen used to be one of the biggest accounting firms in the world. Photo by Pixabay on Pexels.com

Arthur Andersen was founded in 1913 by Arthur E. Anderson. The firm gradually grew its presence around the United States, earning praise for maintaining rigorous accounting standards. Arthur Andersen famously maintained that their responsibility as accountants was to investors, as opposed to management of clients. They were renowned for honesty, exemplified by one case where the firm purportedly turned down a high sum when fraudulent accounts were proposed. Andersen himself died in 1947, but the business continued to grow.


At their height, Arthur Andersen were one of the ‘big five’ accounting firms – alongside PwC, Deloitte, Ernst & Young and KPMG. Services the firm offered included auditing, tax and consultancy. The company provided services to some of the world’s biggest corporations. The business enjoyed continued growth, with their consultancy arm especially emerging as a profitable area of the business during the 1970s.


Trouble however began in the 1980s. With consultancy services becoming a lucrative area, there was pressure on all accounting firms to balance their faithfulness to accounting standards with the desire of their clients to maximise profits. Consultancy work soon accounted for the majority of the firm’s revenue – leading to poor relations developing between the consultancy and auditing divisions of the firm. Andersen Consulting was consequently spun off in 1989; though it remained part of the parent firm.




Bitter disputes between the two businesses throughout the 1990s led to a court battle. This resulted in a $1.2bn payment from Andersen Consulting to Arthur Andersen (relating to back-payments). However, in a major victory for Andersen Consulting – the court also allowed the consultancy arm to declare total independence from Arthur Andersen. Andersen Consulting were forced to drop the ‘Andersen’ from their name. They became Accenture in 2001. Accenture have since turned into one of the world’s most successful consultancy firms.


Meanwhile, the auditing division of Arthur Andersen was spiralling out of control. This was predominantly due to their part in the 2001 Enron Scandal – commonly seen as the worst corporate disaster in history. Enron declared bankruptcy in 2001, despite attaining revenues of over $100million in 2000. Investigations into the energy giant’s accounts led to the suggestion that Arthur Andersen had been complicit in a wide-scale accountancy fraud, which had subsequently hugely exaggerated Enron’s assets – fooling investors.


Arthur Andersen had failed to fulfil its duty as its auditor – instead being complicit with the scandal. As investigations into Enron’s accounts were ongoing, orders were passed down by senior employees at Arthur Andersen for worker’s to shred Enron audit documents wherever possible. Arthur Andersen were one of several victims of the Enron scandal – though they contributed hugely to their own downfall with their actions.


Arthur Andersen was one of many organisations to be affected by the Enron Scandal


Arthur Andersen were found guilty of obstruction of justice in relation to their actions in the Enron scandal. As a result of this, the firm had to surrender its license to practice. This crippled the business, with clients and employees alike quickly moving elsewhere, with some arms of the business sold off to other accountancy firms. Arthur Andersen were also implicated in other bankruptcies – such as WorldCom, and other accounting scandals – such as Waste Management and Sunbeam.


The business continued as a holding company, albeit with minimal operations. In 2005, the Supreme Court of the United States reversed the original conviction of obstruction of justice – with the trial judge’s legal instructions to the jury having been deemed erroneous. By this time however, there were just around 150 employees on the firm’s books, with little chance of staging a revival. The business would gradually be dissolved over the subsequent years.


While Arthur Andersen as a business doesn’t exist – the Andersen name remains thanks to the ‘Andersen Tax’ company. The company was founded as ‘Wealth and Tax Advisory Services’ in 2002, having purchased some of Arthur Andersen’s tax division. The business enjoyed early success, and has witnessed growth in recent years. The business utilises consultancy and wealth management – opting to forgo audit work – the very activity that led to Arthur Andersen’s demise.




The collapse of Arthur Andersen had a profound effect on the world. The firm grew rapidly in the 1900s – in part due to its reputation as an honest company who stringently satisfied its ethical obligations. Yet this approach clearly didn’t remain, leading to its downfall. Its role in the Enron scandal resulted in its collapse. While remnants of the original business remain through Accenture and Andersen Tax, Arthur Andersen – the parent – simply had irrevocable damage.





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