An Analysis of Fraud at Waste Management and Andersen’s Professional Responsibilities

Abstract

The purpose of the case is to provide an opportunity for students to research Securities and Exchange Commission filings in the Waste Management fraud and apply their knowledge of ethics and professional responsibilities to assess whether Andersen met its ethical obligations under the AICPA Code of Professional Conduct. The Waste Management fraud was selected because of the depth of accounting and auditing issues including: failing to properly record expenses; purposeful overstatement of earnings; netting one-time gains against operating expenses; failing to insist that proposed audit adjustments are made; and a lack of independence, objectivity, and due care in the performance of professional responsibilities.

The case describes the $1.7 billion earnings restatement at Waste Management during 1992 – 1997. Students use a framework to analyze accounting irregularities and their effects on the financial statements. They critically evaluate Andersen’s professional judgments and decision-making process by examining accounting and audit deficiencies described in SEC documents. Materiality issues are explored to evaluate Andersen’s contention that the misstatements in the financial statements were not material.

Citation

Mintz, S. (2014), "An Analysis of Fraud at Waste Management and Andersen’s Professional Responsibilities", Research on Professional Responsibility and Ethics in Accounting (Research on Professional Responsibility and Ethics in Accounting, Vol. 17), Emerald Group Publishing Limited, Leeds, pp. 203-224. https://doi.org/10.1108/S1574-0765(2013)000017012