This week, Arthur Andersen finally got what it has wanted for three years -- its name cleared. The dark cloud that has been hanging over the reputation of the former behemoth of the accounting world was lifted this week, when the Supreme Court overturned its conviction on one count of obstruction for shredding documents related to its audits of its former client Enron Corp.
Three years after the guilty verdict that effectively destroyed the firm, Supreme Court justices, in a unanimous opinion, said that the former Big Five accounting firm's June 2002 conviction was improper because of flawed jury instructions.
In case you need a refresher, a Houston jury found the former Big Five accounting firm, once the nation's largest, guilty for instructing its employees to shred Enron-related documents in keeping with its document retention policy, even as a Securities and Exchange Commission investigation looked likely late in 2001. That verdict was upheld by an appeals court.
The Court's ruling, no doubt, has members of the accounting profession thinking of all that has changed in their world since Andersen's demise. Enron's downward spiral was the straw that broke the camel's back, ending the profession's long era of self-regulation.
Prior to 2002, no one in the profession had heard the words "Sarbanes-Oxley Act" or "Public Company Accounting Oversight Board" -- words that are now as common to CPAs as the acronyms GAAP and FASB.
Even before the guilty verdict was handed down, the case left a black eye on the audit profession. The once mighty Andersen, which had built its reputation over several decades, saw it ruined in a matter of months, as its audit clients fled. The firm shuttered its audit practice in August of 2002, changing forever the look of the accounting landscape. The Big Five became Four, and the so-called Group B firms seized an unprecedented opportunity to grab business that they previously wouldn't have had access to. Almost 30,000 people -- many of whom had spent their entire careers at Andersen -- were displaced by the firm's unraveling.
While the entire profession has felt the aftermath of that guilty verdict, I doubt many felt it the way those former Andersen employees have. And while the profession has found ways to repair its reputation, how can you rebuild a long-shattered firm?
