Arthur Andersen

Also known as: Andersen, DeLany & Co. — the founding name, 1913–1918 · Arthur Andersen & Co. — the classic firm name from 1918 · Arthur Andersen LLP — the final legal styling · Andersen Worldwide — the Swiss holding structure of 1989 that held both Andersen firms · Andersen — the trade name clients and press used · One of the Big Five — with Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers

Business

Definition

Arthur Andersen (1913–2002) was the Chicago-founded accounting and professional-services firm — formally Arthur Andersen & Co., later Arthur Andersen LLP — that grew into one of the world’s “Big Five” audit firms before its collapse in the Enron wreckage. It was founded in 1913 in Chicago by Arthur E. Andersen — who had become Illinois’s youngest certified public accountant at twenty-three — and his partner Clarence DeLany as Andersen, DeLany & Co., taking the founder’s name alone when DeLany resigned in 1918. (Wikipedia — Arthur Andersen) By 2001 the firm stood alongside Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers at the top of the profession, with revenue of US$9.3 billion in 2002 — a scale built on a worldwide network of member firms rather than branches, the structure that made its name a global franchise. (Wikipedia — Arthur Andersen)

The fall was as fast as the rise. In 1989 its audit and consulting practices became separate units of Andersen Worldwide; after years of internal war, an International Chamber of Commerce arbitration ended in August 2000 with Andersen Consulting buying its independence for US$1.2 billion and surrendering the Andersen name — becoming Accenture on January 1, 2001. (Wikipedia — Arthur Andersen, Wikipedia — Accenture) A year later the firm’s Houston office was shredding Enron documents; on June 15, 2002 Andersen was convicted of obstruction of justice, and on August 31, 2002 it surrendered its CPA licenses and its right to practice before the Securities and Exchange Commission — effectively ending the business, with some 85,000 employees losing their jobs. The United States Supreme Court unanimously reversed the conviction in 2005 — too late for the firm. (Wikipedia — Enron scandal, Wikipedia — Andersen v. United States) The Philippine connection ran through the same network: SyCip, Gorres, Velayo & Co. was Andersen’s Philippine member firm from 1985 until the distancing of 2002. (Wikipedia — SGV & Co.)

Identities

Source Type	Identity
Wikipedia	Arthur Andersen
Wikidata	Arthur Andersen (Q392730) — aliases Arthur Andersen & Co., Arthur Andersen LLP; inception 1913, dissolved 2002 (Wikidata — Q392730)
DBpedia	Arthur Andersen (label verified) — https://dbpedia.org/page/Arthur_Andersen
ProductOntology	N/A
Wiktionary	N/A (no entry at “Arthur Andersen”; 404 verified this session)
Library of Congress Subject Headings (LCSH)	N/A (LOC authorities service unreachable this session)
MeSH	N/A
NCBI Taxonomy	N/A
AGROVOC	N/A
Google Scholar	Arthur Andersen accounting firm Enron audit failure obstruction of justice 2002 conviction Andersen v. United States 2005 reversal Andersen Consulting split Accenture arbitration 2000 SGV Philippines member firm Big Five
ConceptNet	N/A (ConceptNet API unreachable this session)
OpenCyc	N/A

Also Known As

Andersen, DeLany & Co. — the founding name, 1913–1918
Arthur Andersen & Co. — the classic firm name from 1918
Arthur Andersen LLP — the final legal styling
Andersen Worldwide — the Swiss holding structure of 1989 that held both Andersen firms
Andersen — the trade name clients and press used
One of the Big Five — with Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers

Examples and Analogies

A federation, not a firm: Andersen practiced worldwide through national member firms — in the Philippines, SyCip, Gorres, Velayo & Co. “became a member firm of Arthur Andersen & Co., S.C.” in 1985 — so the Andersen name in Manila meant a Filipino partnership carrying the global firm’s methodology and brand. (Wikipedia — SGV & Co.)
One founder’s name, two firms after 1989: Arthur Andersen and Andersen Consulting became separate units of Andersen Worldwide Société Coopérative — the consultant passing up to 15 percent of its profits to the other side, until the roof came off in arbitration. (Wikipedia — Accenture)
The consultancy’s Philippine footprint: the Andersen tie brought Andersen Consulting itself to Manila — SGV’s Offshore Systems Development Center opened in 1986 “with assistance from Andersen Consulting” and sold software services through its global network. (Wikipedia — SGV & Co.)
The audit-consultancy conflict in one client: in 2000 Andersen earned $25 million in audit fees and $27 million in consulting fees from Enron — the fee structure the Powers Committee weighed in finding that Andersen “did not fulfill its professional responsibilities” in its Enron audits. (Wikipedia — Enron scandal)
Verified firm data:
Founding: 1913, Chicago, as Andersen, DeLany & Co.; renamed Arthur Andersen & Co. in 1918 (Wikipedia — Arthur Andersen)
Split: arbitration concluded August 2000; Andersen Consulting paid US$1.2 billion and gave up the Andersen name; renamed Accenture on January 1, 2001 (Wikipedia — Arthur Andersen, Wikipedia — Accenture)
Enron collapse and end: document destruction revealed January 2002; Enron dismissed Andersen as auditor January 17, 2002; lead partner David Duncan pleaded guilty to obstruction April 10, 2002; obstruction conviction June 15, 2002; surrender of CPA licenses and SEC practice August 31, 2002; about 85,000 employees displaced; roughly 200 remained by 2005 (Wikipedia — Enron scandal, Wikipedia — Arthur Andersen)
Reversal: Arthur Andersen LLP v. United States, 544 U.S. 696 (2005), decided May 31, 2005, 9-0, Chief Justice Rehnquist (Wikipedia — Andersen v. United States)
Philippine franchise: SGV & Co., Andersen member firm 1985–2002; Ernst & Young member practice from September 1, 2002 (Wikipedia — SGV & Co.)

Usage Scenarios

1. Auditing the Listed Economy

Andersen’s global model — and its Philippine expression through SGV, which audited roughly half the companies listed on the Philippine Stock Exchange as of December 2016 — is the standard case study of audit concentration: the capital market’s assurance resting on a handful of firms, one of which vanished in 2002. (Wikipedia — SGV & Co.)

2. Teaching Audit Independence

The Enron engagement is the profession’s textbook failure: a dominant auditor collecting audit and consulting fees from the same client, then destroying documents when the regulators arrived — the combination that produced both the criminal case and the Sarbanes-Oxley Act of 2002. (Wikipedia — Enron scandal, Wikipedia — Arthur Andersen)

3. Studying Corporate Death Sentences

Because “the SEC does not accept audits from convicted felons,” the June 2002 conviction functioned as an execution order: license surrender on August 31, 2002 ended the firm regardless of any later appeal — professional existence depending on regulatory standing. (Wikipedia — Arthur Andersen)

4. Tracing the Andersen Heritage

The firm’s survivors map its pieces: Accenture (from the 2001 split), Protiviti and Andersen Tax (from the 2002 collapse’s remains), and — in the Philippines — SGV’s transfer to Ernst & Young, where the Andersen-trained practice continued under a new global flag. (Wikipedia — Arthur Andersen, Wikipedia — SGV & Co.)

5. Reading the Court Record

Arthur Andersen LLP v. United States is cited as an instruction-error classic: the Supreme Court reversed because the jury could convict without finding that the firm knew its conduct was unlawful — the legal epilogue every account of the firm’s demise must carry. (Wikipedia — Andersen v. United States)

Strategies

Franchise the brand, localize the practice: Andersen grew by anchoring dominant local firms — SGV in the Philippines from 1985 — to a single global methodology and name, market access flowing both ways. (Wikipedia — SGV & Co.)
Sell both assurance and advice: the consulting arm grew alongside the audit practice until the two units’ economics collided — the profit transfers and competing consulting lines the 2000 arbitration untangled. (Wikipedia — Accenture)
Arbitrate the family breakup: Andersen Worldwide’s shareholders resolved the civil war by arbitration rather than litigation — a $1.2 billion payment and a name surrender, Arthur Andersen’s CEO resigning hours after the ruling. (Wikipedia — Arthur Andersen)
Fight the indictment — and lose the clients anyway: the firm contested the obstruction charge to verdict and to the Supreme Court, winning the legal argument in 2005 three years after the client base, licenses, and partnerships were gone. (Wikipedia — Andersen v. United States, Wikipedia — Arthur Andersen)

Security and Safety Measures

Audit as market safeguard, and its failure: Enron “fraudulently reported $100 billion in revenue through institutional and systematic accounting fraud,” audited by the firm that earned consulting fees from it — the standing demonstration of what the capital market loses when assurance fails. (Wikipedia — Arthur Andersen, Wikipedia — Enron scandal)
The regulatory kill switch: the SEC’s rule against accepting audits from convicted felons converted a criminal verdict into immediate professional death — the system’s ultimate enforcement mechanism, tested on one of the profession’s largest firms. (Wikipedia — Arthur Andersen)
Record-preservation as criminal law: the obstruction charge arose from shredding “several tons of relevant documents” and deleting nearly 30,000 e-mails and files — the retention duty every auditor now teaches from this case. (Wikipedia — Enron scandal)
The corrective ruling: the Supreme Court’s requirement of proof of “consciousness of wrongdoing” protects honest document management from criminalization — the safeguard the unanimous 2005 reversal articulated for the profession the conviction had destroyed. (Wikipedia — Andersen v. United States)
For researchers: in Philippine sources the relevant entity is usually SGV as Andersen’s member firm, not an Andersen branch; date the relationship 1985–2002, and pair the 2002 conviction with its 2005 reversal in any citation. (Wikipedia — SGV & Co., Wikipedia — Andersen v. United States)

Historical Context

The firm began with the profession’s new man: Arthur Andersen, orphaned at sixteen, Illinois’s youngest CPA at twenty-three, opened his Chicago practice with Clarence DeLany in 1913; the firm took his name alone from 1918 and built, over eight decades, one of the world’s largest accounting practices. (Wikipedia — Arthur Andersen) The modern structure arrived in 1989, when audit and consulting became separate units of Andersen Worldwide — the arrangement whose breakdown the ICC arbitration ended in August 2000: Andersen Consulting left, paid US$1.2 billion, and became Accenture on January 1, 2001, the new name coined from “Accent on the future.” (Wikipedia — Accenture)

Then came Enron. The client’s 2001 bankruptcy exposed the accounting fraud Andersen had certified; the Houston office’s document destruction surfaced in January 2002; Enron fired its auditor on January 17; and on June 15, 2002 a jury convicted the firm of obstruction of justice. (Wikipedia — Enron scandal) License surrender on August 31, 2002 ended the firm; Congress answered with the Sarbanes-Oxley Act that year; and on May 31, 2005 the Supreme Court unanimously reversed the conviction — a vindication arriving three years too late, to a firm of about 200 remaining employees. (Wikipedia — Arthur Andersen, Wikipedia — Andersen v. United States)

The Philippine thread ran through it all. SGV — the country’s largest firm, founded by Washington SyCip in 1946 — became Andersen’s member firm in 1985 and opened its Manila Offshore Systems Development Center in 1986 with Andersen Consulting’s assistance. (Wikipedia — SGV & Co.) When Enron brought the global firm down, the Filipino franchise survived by moving: SGV distanced itself from Arthur Andersen in 2002 and became a member practice of Ernst & Young on September 1, 2002 — the local continuity this wiki’s entries on SGV & Co. and Washington SyCip record, and the reason the Andersen collapse marks a chapter boundary, not an ending, in Philippine professional-services history. (Wikipedia — SGV & Co.)

Challenges and Controversies

The Enron Engagement

The root controversy is the audit itself: Andersen certified the statements of a company that had “fraudulently reported $100 billion in revenue” while collecting $27 million in consulting fees on top of $25 million in audit fees from the same client in 2000 — the conflict the Powers Committee’s finding crystallized. (Wikipedia — Enron scandal)

The Conviction and Its Reversal

The criminal case remains double-edged: the June 15, 2002 verdict punished document destruction, but the Supreme Court’s unanimous 2005 reversal held the jury instructions so vague that “Andersen could have been convicted without any proof that the firm knew it had broken the law” — a vindication arriving after the firm had ceased to exist, leaving both the justice and the proportionality of its death debated. (Wikipedia — Arthur Andersen, Wikipedia — Andersen v. United States)

The Split with Andersen Consulting

The 2000 arbitration ended a decade of fraternal conflict — the consulting unit resented transferring up to 15 percent of profits to a sibling that had launched its own competing consulting line — and the settlement left both sides rebranded: Accenture born, Arthur Andersen diminished by the loss of its faster-growing half on the eve of the scandal. (Wikipedia — Accenture)

The Philippine Aftermath

In Manila the collapse registered as a decision point: SGV, half the listed economy’s auditor and Andersen’s member firm since 1985, cut the Andersen tie in 2002 and joined Ernst & Young on September 1, 2002 — a transition whose aftershocks, including the 2008 departure of the “SGV 14” partners over global-integration terms, this wiki’s SGV & Co. entry documents as the local echo of the global firm’s fate. (Wikipedia — SGV & Co.)