Memo
To:Mr. Berardino
From:Prince Tomar
CC:Arthur Anderson Senior Team
Date:April 19, 2005
Re:Arthur Anderson Scandals
Arthur Anderson is being called to court to defend against failing to comply with accepted accounting principles. Since Arthur Anderson found the firm and died to have Leonard Spacek take over, Arthur Anderson has become a part of the “Big Five”. Arthur Anderson has had a conflict of interest charge and is also being charged in other cases. Our best chance to survive as a company is to try and mitigate the amount of damage done to our company by these trials.
Due to Arthur Anderson’s past dealings with Enron we now under extreme scrutiny. We are being called to court to defend against the accusations of our accounting practices. We are not only being called into court because of our dealings with Enron alone, but also for other big name companies that we have failed to abide by the accepted accounting principles for.
Since the first day that Arthur Anderson found the company in 1913 we have been able to maintain a good reputation. Even through the Great Depression, Arthur Anderson maintained a profit and kept its name in tact. We were part of the reason America was able to come out the depression. After Arthur Anderson’s death, Leonard Spacek led the firm back to grounds after a struggle for control. In 1990 Arthur Anderson established itself as a “Big Five Firm”. We were the only firm to do this with out establishing a merger.
Arthur Anderson conducts audits for 70 percent of Houston’s oil and gas companies. This is why there is no surprise that a big name company like Enron has chosen to use the services of Arthur Anderson since it was created in 1985. Enron is a business that deals with Energy Trading. Being that Arthur Anderson has such close ties with the company, there have been a number of auditors that worked inside of Enron. They had their own private offices inside of Enron.
The events that Arthur Anderson is being accused of are failing to comply with the rules set by the SEC. In the situation of the Enron case, we are being accused of keeping losses off our books to make our company look more enticing to share holders. Other cases we are going to defend ourselves on are the sunbeam case. We are charged with giving the CEO of this company a clean opinion. Two other cases involving hiding investment losses are the waste management case and the Baptist Foundation of Arizona case. Both of theses are being closely examined now due to our mishap with Enron’s Auditing.
There are many steps we can take to try and keep the situation at a minimum amount of damage. First thing we need to do is find out how the 3% rule was overlooked. We have three years to fix our statement. This being the case we can mitigate the Enron case because part of our charges will be dropped. Also with the Sunbeam we can mitigate those charges by showing we took a close look into their situation and their numbers looked normal. It is crucial to prove we did could not notice that they were counting revenue before they earned them. The other two cases there is not much hope for, but it will not cost us too much. They are smaller cases and the government can not take away our company for that. The priority here is to try to mitigate the big charges dealing with Enron and Sunbeam.
Sincerely,
Prince Tomar
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