To what purpose did Arthur Andersen die? Part 3

First post in this series discussed an editorial in the Chicago Tribune concluding that Big 5 accounting firm Andersen died in vain.

Second post provides background on the large number of audit failures that surrounded Andersen.  The editorial provides background on the poor ethical environment of the firm.

David Albrecht, in his post 10 Years Later – Did Andersen Die in Vain?, has a very different answer to the question.

There was a purpose in the demise of Andersen.  Punishment

In his post, Professor Albrecht explains the criminal indictment, conviction, and by extension the reasonably foreseeable collapse of the firm, was punishment.

It was punishment for specific crimes regarding Enron.  In the bigger picture of things, which is the point of the Tribune editorial, it was also punishment for a pattern of the firm’s audit failures.

It’s ironic that we can quote the Tribune editorial to make the professor’s case. Ponder these comments from the editorial:

Prosecutors who previously had stopped short of bringing charges against Andersen came to believe that its leaders considered civil penalties and promises of reform to be mere speed bumps on the road to ever-greater profits.

A decade ago this month, Andersen’s brass arrived in Washington for Enron-related settlement talks — myopic, arrogant and devoid of remorse. Justice Department officials concluded that the repeat offenders across the table would offend again if they weren’t stopped.

Senior leaders who make it look like they think civil penalties are just the cost of doing business. Senior leaders arriving for negotiations with an attitude showing they are “myopic, arrogant and devoid of remorse.”

In a sentence, the firm wasn’t trying to improve, even after a series of audit failures.

Is it much of a shock that senior Justice Department officials figured that another round of civil penalties would not do any good?

The professor’s observation is that the indictment and conviction are punishment:

The Arthur Andersen audit firm didn’t die to accomplish a great purpose, or to make the world a better place. It died because it couldn’t survive its punishment. And if anyone or anything has ever deserved punishment, it was Andersen.

Arthur Andersen’s death was not intended to prevent defrauded investors from being victimized in the future. The death was intended to prevent Andersen from doing it again. And in that Andersen’s punishment has been successful. Its death was not in vain.

The lofty goal searched for by the Tribune staff was not to cool down other Andersen partners.  The goal was not to ‘send a message’ to other CPAs.  The goal was not deterrence for future fraudsters.

The goal, as described by the professor, was to prevent Andersen from having another Arizona Baptist Foundation or Enron.

How many audit failures has Andersen had since 2002?