The Fall of Arthur Andersen, LLP and Enron Corporation, and the Rise of the Sarbanes-Oxley Act of 2002

Abstract

The purpose of this paper is to explain the fall of the Arthur Andersen accounting firm and the energy giant Enron Corp. as well as the rise of the Sarbanes-Oxley Act of 2002. Arthur Andersen was a Chicago-based accounting firm that engaged in auditing, tax advising, consulting and other professional services to major corporations. Arthur Andersen fell victim to the excessive greed of Enron with its disproportionate and unwarranted use of off-balance-sheet entities to hide its losses. In the end, both organizations collapsed. In the ashes of the debacle, the United States Congress stepped in, and passed the Sarbanes-Oxley Act, a law whose intent was to restore investor confidence. The Act succeeded. As time passed, several previous Arthur Andersen partners formed a new accounting firm, eventually named Andersen Global, while removing the tarnish to the Arthur Andersen name in the Supreme Court in a 9-0 decision. Enron never recovered, and several senior managers went to prison. The debacle ended, and the nation now possesses a law that will hopefully prevent overreaching greed to dominate the financial industry in the future.