Editing Arthur Andersen (section)

=== Enron scandal ===
{{Main|Enron scandal}}
Following the [[Enron scandal|2001 scandal]] in which energy giant [[Enron]] was found to have fraudulently reported $100 billion in revenue through institutional and systematic [[accounting scandals|accounting fraud]], Andersen's performance and alleged complicity as an auditor came under intense scrutiny. The Powers Committee (appointed by Enron's board to look into the firm's accounting in October 2001) came to the following assessment: "The evidence available to us suggests that Andersen did not fulfill its professional responsibilities in connection with its audits of Enron's financial statements, or its obligation to bring to the attention of Enron's Board (or the Audit and Compliance Committee) concerns about Enron's internal contracts over the related-party transactions".<ref>{{cite web |first=Andrew |last=Cornford
| title=Internationally Agreed Principles for Corporate Governance and the Enron Case | publisher=[[United Nations Conference on Trade and Development]] |series=G-24 Discussion Paper Series No. 30 | location=[[New York City]] |date=June 2004 | page=30 | url=http://www.unctad.org/en/docs/gdsmdpbg2420046_en.pdf|archive-url=https://web.archive.org/web/20110304064316/http://www.unctad.org/en/docs/gdsmdpbg2420046_en.pdf | url-status=live | archive-date=March 4, 2011}}</ref>

On June 15, 2002, Andersen was convicted of [[obstruction of justice]] for shredding documents related to its audit of Enron. Although the [[Supreme Court of the United States|Supreme Court]] [[Arthur Andersen LLP v. United States|reversed]] the firm's conviction, the impact of the scandal combined with the findings of criminal complicity ultimately destroyed the firm. [[Nancy Temple]] (in the firm's legal department) and [[David Duncan (accountant)|David Duncan]] (lead partner for the Enron account) were cited as the responsible managers in the scandal because they ordered subordinates to shred relevant documents.<ref>{{Cite web |url=http://bodurtha.georgetown.edu/enron/Andersen%20Ex-Party%20Pleads%20Guilty,%20In%20a%20Significant%20Blow%20to%20the%20Firm.htm |title=Andersen Ex-Party Pleads Guilty, In a Significant Blow to the Firm<!-- Bot generated title --> |access-date=2006-02-04 |archive-url=https://web.archive.org/web/20050905085752/http://bodurtha.georgetown.edu/enron/Andersen%20Ex-Party%20Pleads%20Guilty,%20In%20a%20Significant%20Blow%20to%20the%20Firm.htm |archive-date=2005-09-05 |url-status=dead }}</ref>

Because the [[U.S. Securities and Exchange Commission]] does not accept audits from convicted felons, the firm agreed to surrender its CPA licenses and its right to practice before the SEC on August 31, 2002—effectively putting the firm out of business. It had already started winding down its American operations after the indictment, and many of its accountants joined other firms. The firm sold the majority of its American operations to other accounting firms such as [[KPMG]],<ref>{{cite news|url=https://www.cbc.ca/news/business/kpmg-to-buy-arthur-andersen-consulting-firms-1.355670|title=KPMG to buy Arthur Andersen consulting firms|date=8 May 2002|newspaper=CBC|access-date=30 January 2024}}</ref> [[Ernst & Young]],<ref>{{cite news|url=https://www.wsj.com/articles/SB1017686314537631360|title=Ernst & Young Steps Up Push for Andersen Units|date=2 April 2002|newspaper=The Wall Street Journal| access-date=30 January 2024}}</ref> [[Deloitte & Touche]]<ref>{{cite news|url=https://www.theguardian.com/business/2002/apr/10/enron2|title=Andersen UK to merge with Deloitte & Touche|date=10 April 2002|newspaper=The Guardian|access-date=30 January 2024}}</ref> and [[Grant Thornton International]].<ref>{{cite news|url=https://www.bizjournals.com/tampabay/stories/2002/06/10/story1.html|title=Grant Thornton buys Andersen practices|date=10 June 2002|newspaper=Tampa Bay Business Journal| access-date=30 January 2024}}</ref> At this time, Arthur Andersen had lost most of its business and two-thirds of its 28,000 employees.<ref name=":0">{{Cite news |last=Maurer |first=Mark |title=Arthur Andersen's Legacy, 20 Years After Its Demise, Is Complicated |url=https://www.wsj.com/articles/arthur-andersens-legacy-20-years-after-its-demise-is-complicated-11661938200 |access-date=2023-05-09 |newspaper=Wall Street Journal |date=August 31, 2022 |language=en-US}}</ref>

The indictment also put a spotlight on the firm's faulty audits of other companies, most notably [[Waste Management (company)|Waste Management]], [[Sunbeam Products]], the [[Baptist Foundation of Arizona]] and [[WorldCom]].<ref>{{cite news|url=https://www.chicagotribune.com/sns-worldcom-andersen-ct-story.html|title=Andersen was WorldCom auditor|date=26 June 2002|newspaper=Chicago Tribune|access-date=30 January 2024}}</ref>

On May 31, 2005, in ''[[Arthur Andersen LLP v. United States]]'', the Supreme Court unanimously reversed Andersen's conviction because of errors in the trial judge's jury instructions. The Supreme Court held that the instructions were too vague to allow a jury to find that obstruction of justice had occurred. The court found that the instructions were worded in such a way that Andersen could have been convicted without any proof that the firm knew it had broken the law or that there had been a link to any official proceeding that prohibited the destruction of documents. The opinion, written by Chief Justice [[William Rehnquist]], also expressed skepticism of the government's concept of "corrupt persuasion"—persuading someone to engage in an act with an improper purpose without knowing that the act is unlawful.<ref name="AA v US in Sup Ct">{{cite court |litigants=Arthur Andersen LLP v. United States |vol=544 |reporter=U.S. |opinion=696 |date=2005 |url=https://www.law.cornell.edu/supct/html/04-368.ZS.html|quote=}}</ref>