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> Michelle was surprised, as her previous company had run this practice for years with full approval from PricewaterhouseCoopers, its accounting firm. I said: “

> Michelle was surprised, as her previous company had run this practice for years with full approval from PricewaterhouseCoopers, its accounting firm. I said: “That’s all fine and good, but I still need Jordan to review it first.” Jordan came back with an answer that I did not expect: “Ben, I’ve gone over the law six times and there’s no way that this practice is strictly within the bounds of the law. I’m not sure how PwC justified it, but I recommend against it.” One of the foundational reasons for the spectacular implosions of both Enron and WorldCom was the behavior of their common auditor, the ginormous accounting firm Arthur Andersen (https://en.wikipedia.org/wiki/Arthur_Andersen https://en.wikipedia.org/wiki/Arthur_Andersen). Andersen was willing to certify pretty much anything these companies wanted to do as fully legal and above-board, because these were big clients and Andersen didn't want to lose them to some other accounting firm by inconveniently insisting that they keep honest books. So they were free to rip people off in all sorts of creative ways for years, protected from close scrutiny by Andersen's seal of approval. All of which is to say that, if you represent serious cash flow and you're tempted to push the legal envelope, you probably shouldn't expect a Big Four accountant to be the one to talk you out of it.

hayksaakian 8y ago
Quick reminder for anyone who might have missed it: Accenture is a spinoff from Anderson Accounting. Do with that knowledge what you will: https://en.wikipedia.org/wiki/Accenture#Emergence_of_Accenture https://en.wikipedia.org/wiki/Accenture#Emergence_of_Accentu...
- AJC-Official 8y ago
  This is a useful bit of knowledge, but to guard against people making irrational judgments about Accenture, it's important to note that (1) It was primarily Anderson's consulting divisions that went to Accenture, and (2) these large auditing firms have offices all over the US and world, and in these types of cases, it was really only a branch or two that were complicit in the fraud. In the same way that we shouldn't condemn the employees of <INSERT TECH COMPANY> because senior leaders decided to <Censor/Abuse/Manipulate users> we shouldn't condemn otherwise ethical accountants because of the misdeeds of their colleagues - especially when they pass more stringent ethical requirements than developers. Ironically, people couldn't differentiate the isolated incident, and AA liquidated/sold because no one wanted to do business with them. [0] [0] en.wikipedia.org/wiki/Arthur_Andersen#Demise
  - adventured 8y ago
    The tech examples will often involve employees directly responsible for building, improving and maintaining the systems of abuse that are central to the ill deeds of the senior leaders you're referring to. The senior leaders can't do what they do without those systems. This concept is fundamentally why 4,000 of Google's employees staged a protest against Google working on AI systems for the military. They have an inkling about what such systems will be used for. So it begs the obvious question about how complicit you are if you build software systems that you know are going to be used for immoral things; that you know ahead of time how they're going to be used by said senior leadership. To say nothing of the fact that often said systems are built for the sole purpose of enabling abuse, so there's very little question about the line of moral responsibility (whether of privacy or in the aiding of censorship in authoritarian nations, et al). This obviously isn't a new debate within tech though, it goes all the way back in the industry (eg IBM's counting machines).
    - deleted 8y ago
      [deleted]
    - chaostheory 8y ago
      > how complicit you are if you build software systems that you know are going to be used for immoral things There's another path to not building and not participating it. It might be possible to be subversive and design these systems to best fit your values: "My bias was always to build decentralization into the net. That way it would be hard for one group to gain control. I didn’t trust large central organizations. It was just in my nature to distrust them." -- Robert Taylor https://theymadethat.com/people/l8tu24/bob-taylor https://theymadethat.com/people/l8tu24/bob-taylor
  - rossdavidh 8y ago
    "Ironically, people couldn't differentiate the isolated incident, and AA liquidated/sold because no one wanted to do business with them." "Ironically" is not the word you should be looking for, there. "Fittingly", or "Unsurprisingly", perhaps. Even if you know not all the apples in the barrel were bad, you know that it was a barrel with more than one bad apple, so you throw that barrel out.
- plorkyeran 8y ago
  The company now known as Accenture was spun off in 1989, and was not involved with Enron.
wu-ikkyu 8y ago
>Andersen was willing to certify pretty much anything these companies wanted to do as fully legal and above-board, because these were big clients and Andersen didn't want to lose them to some other accounting firm by inconveniently insisting that they keep honest books According to friends in the Big 4, this seems like standard practice.
- hef19898 8y ago
  As much as Sarbanes-Oxley can be a pain in the ass there are reason for its existance. And having n to change your external auditor ever so often is a good thing. As is bein SOX compliant in general. Companies that aren't or just barely tend to have some ugly, not illegal just ugly, stuff going on sometimes.
reaperducer 8y ago
Andersen was willing to certify pretty much anything these companies wanted to do as fully legal and above-board, because these were big clients and Andersen didn't want to lose them to some other accounting firm by inconveniently insisting that they keep honest books. Anecdotally, this happens at all levels of accounting. I've hired two accountants in my lifetime. Both times I was asked something along the lines of, "I can be as as clean or dirty as you want me to be. Just let me know now, before we get started."
- jf 8y ago
  I'm reminded of an anecdote I heard once: When interviewing an accountant, the founder showed the accountant some financial and asked the accountant "What story do these numbers tell?" to which the accountant replied "What story do you want them to tell?"
  - notriddle 8y ago
    That kind of anecdote comes in an insane number of variations. Even if it's based in truth, it's probably been distorted through retelling. In other words, don't try to pass off jokes as anecdotes.
    - icelancer 8y ago
      Shrug. Then add me to the list of someone who had this asked of me directly. Twice.
    - cgio 8y ago
      Maybe you'll find it interesting that the Greek word for joke is anecdoto.
      - C7H8N4O2 8y ago
        That is interesting, thank you.
  - refurb 8y ago
StClaire 8y ago
I've seen a couple comments about Arthur Andersen, Enron, and Accenture in this thread and I just want to detail everything that went down in that situation. Full Disclosure: I recently left a position with one of Accenture's subsidiary. I also hate that company. The Supreme Court actually vacated Arthur Andersen's conviction for their actions in Enron. The SC basically said the jury instructions were too vague, and the jury could have believed that Arthur Andersen thought they did everything right and legally but still voted to convict. Arthur Andersen was never retried since there wasn't much left at that point anyway. Arthur Andersen Accounting (or whatever they formally called themselves) and Arthur Andersen Consulting had already broken up into two different companies. They set up some weird agreement where the more profitable of the two would pay a cut of the profit difference to the other company. Consulting is always more profitable than accounting (which is why all the Big 4 have gotten back into even in the age of Sarbane-Oxley, where they can't audit a company they consult for), so Arthur Andersen consulting had to send a big-ass check to the accountants every quarter and they wanted to get out of that. The blow up of Arthur Andersen accounting presented the perfect opportunity. Arthur Andersen Consulting changed their name to Accenture to distance themselves from the Enron scandal, but it was mostly PR because they didn't have anything to do with Enron anyway. McKinsey, however, had consultants all through Enron. I believe Skilling worked for McKinsey right out of college and threw them a ton of work. There's no way people at McKinsey didn't know what Enron was up to, but they somehow got off scot-free
- speby 8y ago
  McKinsey wasn't their legal auditor, blessing their financial statements. That's like saying any management consultant or contractor at Enron at the time should be punished. That makes no sense.
  - nradov 8y ago
    McKinsey was far more than just a management consultant for Enron. They were deeply embedded in the decision making process and even if they didn't do anything outright criminal they certainly share moral responsibility for Enron's misdeeds. https://www.newyorker.com/magazine/2002/07/22/the-talent-myth https://www.newyorker.com/magazine/2002/07/22/the-talent-myt...
dman 8y ago
Reminds me of https://www.ft.com/content/c1231f40-f695-11e7-88f7-5465a6ce1a00 https://www.ft.com/content/c1231f40-f695-11e7-88f7-5465a6ce1... . Excerpt from article - -------------- Ramalinga Raju, Satyam’s then chairman, admitted to overstating the company’s cash balance by $1bn, as well as exaggerating the company’s headcount by 13,000. “It was like riding a tiger, not knowing when to get off without being eaten,” he wrote of the growing deception. The company later admitted that the total irregularities amounted to $1.7bn. ---------------------- How these things get past auditors is beyond me.

hayksaakian 8y ago

Quick reminder for anyone who might have missed it: Accenture is a spinoff from Anderson Accounting. Do with that knowledge what you will: https://en.wikipedia.org/wiki/Accenture#Emergence_of_Accenture https://en.wikipedia.org/wiki/Accenture#Emergence_of_Accentu...

AJC-Official 8y ago
This is a useful bit of knowledge, but to guard against people making irrational judgments about Accenture, it's important to note that (1) It was primarily Anderson's consulting divisions that went to Accenture, and (2) these large auditing firms have offices all over the US and world, and in these types of cases, it was really only a branch or two that were complicit in the fraud. In the same way that we shouldn't condemn the employees of <INSERT TECH COMPANY> because senior leaders decided to <Censor/Abuse/Manipulate users> we shouldn't condemn otherwise ethical accountants because of the misdeeds of their colleagues - especially when they pass more stringent ethical requirements than developers. Ironically, people couldn't differentiate the isolated incident, and AA liquidated/sold because no one wanted to do business with them. [0] [0] en.wikipedia.org/wiki/Arthur_Andersen#Demise
- adventured 8y ago
  The tech examples will often involve employees directly responsible for building, improving and maintaining the systems of abuse that are central to the ill deeds of the senior leaders you're referring to. The senior leaders can't do what they do without those systems. This concept is fundamentally why 4,000 of Google's employees staged a protest against Google working on AI systems for the military. They have an inkling about what such systems will be used for. So it begs the obvious question about how complicit you are if you build software systems that you know are going to be used for immoral things; that you know ahead of time how they're going to be used by said senior leadership. To say nothing of the fact that often said systems are built for the sole purpose of enabling abuse, so there's very little question about the line of moral responsibility (whether of privacy or in the aiding of censorship in authoritarian nations, et al). This obviously isn't a new debate within tech though, it goes all the way back in the industry (eg IBM's counting machines).
  - deleted 8y ago
    [deleted]
  - chaostheory 8y ago
    > how complicit you are if you build software systems that you know are going to be used for immoral things There's another path to not building and not participating it. It might be possible to be subversive and design these systems to best fit your values: "My bias was always to build decentralization into the net. That way it would be hard for one group to gain control. I didn’t trust large central organizations. It was just in my nature to distrust them." -- Robert Taylor https://theymadethat.com/people/l8tu24/bob-taylor https://theymadethat.com/people/l8tu24/bob-taylor
- rossdavidh 8y ago
  "Ironically, people couldn't differentiate the isolated incident, and AA liquidated/sold because no one wanted to do business with them." "Ironically" is not the word you should be looking for, there. "Fittingly", or "Unsurprisingly", perhaps. Even if you know not all the apples in the barrel were bad, you know that it was a barrel with more than one bad apple, so you throw that barrel out.
plorkyeran 8y ago
The company now known as Accenture was spun off in 1989, and was not involved with Enron.

wu-ikkyu 8y ago

>Andersen was willing to certify pretty much anything these companies wanted to do as fully legal and above-board, because these were big clients and Andersen didn't want to lose them to some other accounting firm by inconveniently insisting that they keep honest books According to friends in the Big 4, this seems like standard practice.

hef19898 8y ago
As much as Sarbanes-Oxley can be a pain in the ass there are reason for its existance. And having n to change your external auditor ever so often is a good thing. As is bein SOX compliant in general. Companies that aren't or just barely tend to have some ugly, not illegal just ugly, stuff going on sometimes.

reaperducer 8y ago

Andersen was willing to certify pretty much anything these companies wanted to do as fully legal and above-board, because these were big clients and Andersen didn't want to lose them to some other accounting firm by inconveniently insisting that they keep honest books. Anecdotally, this happens at all levels of accounting. I've hired two accountants in my lifetime. Both times I was asked something along the lines of, "I can be as as clean or dirty as you want me to be. Just let me know now, before we get started."

jf 8y ago
I'm reminded of an anecdote I heard once: When interviewing an accountant, the founder showed the accountant some financial and asked the accountant "What story do these numbers tell?" to which the accountant replied "What story do you want them to tell?"
- notriddle 8y ago
  That kind of anecdote comes in an insane number of variations. Even if it's based in truth, it's probably been distorted through retelling. In other words, don't try to pass off jokes as anecdotes.
  - icelancer 8y ago
    Shrug. Then add me to the list of someone who had this asked of me directly. Twice.
  - cgio 8y ago
    Maybe you'll find it interesting that the Greek word for joke is anecdoto.
    - C7H8N4O2 8y ago
      That is interesting, thank you.
- refurb 8y ago

StClaire 8y ago

I've seen a couple comments about Arthur Andersen, Enron, and Accenture in this thread and I just want to detail everything that went down in that situation. Full Disclosure: I recently left a position with one of Accenture's subsidiary. I also hate that company. The Supreme Court actually vacated Arthur Andersen's conviction for their actions in Enron. The SC basically said the jury instructions were too vague, and the jury could have believed that Arthur Andersen thought they did everything right and legally but still voted to convict. Arthur Andersen was never retried since there wasn't much left at that point anyway. Arthur Andersen Accounting (or whatever they formally called themselves) and Arthur Andersen Consulting had already broken up into two different companies. They set up some weird agreement where the more profitable of the two would pay a cut of the profit difference to the other company. Consulting is always more profitable than accounting (which is why all the Big 4 have gotten back into even in the age of Sarbane-Oxley, where they can't audit a company they consult for), so Arthur Andersen consulting had to send a big-ass check to the accountants every quarter and they wanted to get out of that. The blow up of Arthur Andersen accounting presented the perfect opportunity. Arthur Andersen Consulting changed their name to Accenture to distance themselves from the Enron scandal, but it was mostly PR because they didn't have anything to do with Enron anyway. McKinsey, however, had consultants all through Enron. I believe Skilling worked for McKinsey right out of college and threw them a ton of work. There's no way people at McKinsey didn't know what Enron was up to, but they somehow got off scot-free

speby 8y ago
McKinsey wasn't their legal auditor, blessing their financial statements. That's like saying any management consultant or contractor at Enron at the time should be punished. That makes no sense.
- nradov 8y ago
  McKinsey was far more than just a management consultant for Enron. They were deeply embedded in the decision making process and even if they didn't do anything outright criminal they certainly share moral responsibility for Enron's misdeeds. https://www.newyorker.com/magazine/2002/07/22/the-talent-myth https://www.newyorker.com/magazine/2002/07/22/the-talent-myt...

dman 8y ago

Reminds me of https://www.ft.com/content/c1231f40-f695-11e7-88f7-5465a6ce1a00 https://www.ft.com/content/c1231f40-f695-11e7-88f7-5465a6ce1... . Excerpt from article - -------------- Ramalinga Raju, Satyam’s then chairman, admitted to overstating the company’s cash balance by $1bn, as well as exaggerating the company’s headcount by 13,000. “It was like riding a tiger, not knowing when to get off without being eaten,” he wrote of the growing deception. The company later admitted that the total irregularities amounted to $1.7bn. ---------------------- How these things get past auditors is beyond me.