Discuss the mistakes made by Arthur Anderson and potential actions that leadership could have taken to prevent the organizational failure.

Fin 571 week 2 learning team

Arthur Anderson, one of the largest accounting firms in the world, made several mistakes which led to their organizational failure.

The first mistake was that Arthur Andersen failed to maintain ethical standards and became too heavily involved with Enron’s accounting decisions. Arthur Anderson was aware of Enron’s unethical practices but failed to take action or speak out against them. This ultimately led to a loss of trust from clients and investors in both companies.

Another mistake made by Arthur Andersen was failing to adhere to Generally Accepted Accounting Principles (GAAP). Auditors are responsible for ensuring financial accuracy but instead, they followed lax accounting rules set by Enron as instructed by senior partners at the firm.

To prevent such an organizational failure, leadership could have implemented better oversight measures over its staff members who worked with external companies and incorporated stricter policies regarding ethics and GAAP compliance throughout all aspects of the company’s operations. Additionally, senior management could have created a culture where speaking out against questionable activities or practices is encouraged and rewarded rather than punished. Finally, stronger reporting systems should have been put in place that allow employees to report any unethical activity without fear of repercussions from their superiors. In this way, actions can be taken promptly before it leads to more serious problems like fraud or litigation claims from shareholders or clients.