Arthur Andersen Llp

Arthur Andersen LLP

Arthur Andersen LLP was a national accounting firm. They performed accounting and consulting services for businesses throughout the United State and all over the world. Arthur Andersen LLP was one of the “Big Five” accounting firms in the United States. Arthur Andersen LLP headquarters was in Chicago, Illinois and they had several other smaller offices all over the world. Arthur Andersen LLP was accused of “cooking the books” of Waste Management for several years.  Arthur Andersen LLP was auditing Waste Management since before 1971 when Waste Management became a public company. Public companies are required to have an accounting firm so they can check over the books with the generally accepted accounting principles (GAAP). Arthur Andersen LLP claimed Waste Management as their “crown jewel” client. Arthur Andersen LLP did not confirm or deny the allegations of the wrong doing on their part. The company however, did pay the $7 million that the Securities and Exchange Commission (SEC) charged them. The $7 million was the biggest civil fine the SEC has given out at that time.

Allgyer, Mairer, and Cercavschi, was three of the audit partners working with Arthur Andersen LLP that had to pay additional penalties. Allgyer had to pay an additional $50,000, Mairer had to pay an additional $40,000 and Cercavschi had to pay an additional $30,000. Allgyer was known to many people as “the Rainmaker”. He was good at what he did especially cross-selling extra services to auditing clients. Cercavschi was already on the engagement team since early 1988, Mairer became partner on the engagement in 1993, and Allgyer became the audit engagement partner in 1997.

Every one of the chief financial officer and chief accounting officer for Waste Management Inc. had previously worked for Arthur Andersen LLP as auditors. In 1990 around fourteen former employees of Arthur Andersen LLP worked in one of the key financial and accounting positions for Waste Management Inc. For the period of 1993 through 1996 Arthur Andersen LLP did false and misleading audit reports on Waste Management Inc. They used improper accounting to inflate the operating income and deferring the recognition of the current period operating expenses. Also by netting one-time gains against current and prior period’s misstatement s of operating expenses. Some of the accounting practices that they were using that violated GAAP were: reduce depreciation expense on its vehicles, equipment and containers, capitalizing interest on landfill development costs, and they did not properly accrue for tax and self-insurance expenses. From 1993 through 1996 before they were caught Arthur Andersen LLP would prepare Proposed Adjusting Journal Entries (PAJE) to cover up their current and prior period misstatements.