The Prosecution of Arthur Anderson Did Not Reduce Employment in the Accounting Industry by 28,000

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Monday, 11 March 2013 22:01

Andrew Ross Sorkin's piece arguing against the prosecution of large banks and other large companies might have led readers to believe that 28,000 people were out of work as a result of Arthur Anderson's bankruptcy, following its prosecution. Of course this is not true.

There is no reason to believe that the demand for accounting services fell as a result of Arthur Anderson's prosecution. While the people who had been working at Arthur Anderson lost their jobs when the company folded, the companies and individuals who were doing business with Arthur Anderson still needed accountants after the firm went out of business. This means that they would have turned to other firms with their business.

The firms who got the business lost by Arthur Anderson presumably hired more accountants and support staff to meet the additional demand. On net, there was probably little net change in employment in the accounting industry.

This point is important since banks and other large companies may try to make the same sort of argument as Sorkin to lead people to believe that there is a public interest in not holding them accountable for their crimes because it would lead to job loss. This is not true.