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Consulting

Not all of the Arthur Andersen & Co. growth came from establishing new local offices. Arthur E. Andersen had pioneered a strategy that bundled audit with consulting services, a strategy that many of his accounting contemporaries warned against as a recipe for conflict of interest. But it became standard practice at Arthur Andersen & Co. for audit and consulting to be presented side by side in the interests of all parties. However, by the 1930s, the market for consulting had dried up, so the warnings were moot for a time.

After World War II, the demand for consulting was renewed and the firm invested heavily in IT consulting. Leonard Spacek recognized an opportunity to expand the firm’s consulting practice by developing the potential of a new technology, computers. He sent Joseph S. Glickauf, an Andersen employee who was an expert on mechanical punch-card systems, to attend a prototype computer demonstration at the University of Pennsylvania. Glickauf became an evangelist for the new technology, announcing, “We stand on the threshold of a new technological era as different from the one which we have just passed through as the industrial era differs from the agricultural age the impact of which will not only [affect] the office and the plant, but society itself.”[22] A short time later, in 1952, he led a team that designed and implemented the first business applications for a computer, a payroll and a material control system at General Electric. Glickauf and his team established Arthur Andersen & Co.’s expertise in computer technologies while gaining the advantage over the other big accounting firms.

Despite the fact that the firm had built the largest management information systems consulting practice in the world by 1973, audit remained the focal point of services and power within the partnership. Although the marriage of accounting and computers was valuable to clients, some partners were reluctant to grow the consulting business and, during the late 1950s and 1960s, consulting services accounted for only about 20 percent of the firm’s business.

Although Arthur E. Andersen had ignored conflict of interest warnings, some partners who followed him took a different view. They believed that the new Administrative Services Division offering technical services was at the very edge of appropriate business for an accounting firm. They believed that independent public accounting firms had a responsibility to avoid work that might make management decisions for a client, and they put limits on the work that the Administrative Services Division could do, restricting it to developing and gathering information but not making decisions.[23]

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