Arthur Andersen, LLP, violated its legal, ethical, and social responsibilities by compromising the principles of the Independent Auditor. The company failed its legal responsibility when a company official Michael Odom told employees to begin shredding documents relating to the Enron audits, when Arthur Andersen lawyers determined an investigation into their accounting practices by the SEC was inevitable (e.g., Klein and Long, 2002). This impacted management planning by adhering to the company’s retention policy and destroying documents only when it knew these documents were potentially damaging to the company, instead of following the legal guidance that would have prevented the destruction of documents in the face of potential litigation. The company violated its own fundamental ethical responsibilities as an objective auditor when it overlooked and allowed questionable accounting processes, instead of challenging them, even if it meant losing a customer and a valuable source of income. This indicates a failure in management planning, in that the managers of the company allowed themselves and their employees to depart from the company’s original purpose and tarnish its reputation as a fair and honest business, because they allowed the ends (profits) to justify the means (overlooking questionable accounting practices). The company also failed in its social responsibility to further the greater good and minimize public harm when it allowed its reputation be ruined by losing its objectivity during the Enron audits. This resulted in the business laying off tens of thousands of employees and shaking the public’s trust in independent audits. This destroyed any long-term, strategic planning because the company was simply unable to perform its main purpose.
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