Bigger Than Enron

Accountants are responsible in analyzing and assessing the revenue, expenses, reporting financial matters and giving advice about the financial health of their employer. They help their client to know the best way to run a business by tracking and analyzing where does the money of the business go. They also give suggestions on where money could be made and advice in budgeting the money in the business.

Niedermeyer, and Presha Niedermeyer. They performed surveys using internal auditors of public companies and external auditors from large and small firms. The survey questioned how auditors made ethical decisions, and they also wanted to see how internal auditors answered versus how external auditors answered. The result of the surveys showed that there was no difference in decision- making between internal and external auditors in the aspect of how major the effects unethical decisions on victims would be. The only difference between auditors in this study was how they make decisions on what is right and what is wrong. It appears that auditors that work for the Big Four have a stronger sense to determine what is right or wrong as opposed to the other auditors working in large and small firms. The study suggests that each firm adopts policies and special training to combat these

Arthur Andersen (AA) contributed to the Enron disaster when it has failed to the management by failing to have Enron establish and enforce its own internal control. There has been flaws to AA‘s internal control. There has been assumption that AA partners were too motivated by revenue recognition thus, overlooking several criteria when providing their services to Enron. Additionally, AA also recognised the retention of audit clients as vital and a loss of any clients would be disadvantaged to an auditor’s career. In AA internal control, the person who is able to make most of the decisions is the person who is most concerned about the revenue or losses of the client’s company.

II. Main Point #2. Contrary to popular belief, Accountants, and the tasks that they perform, are an important part of most people’s everyday life.

Accountants are relied upon to be trustworthy and maintain high ethical standards. It is because of the nature of the profession that puts them in a position of trust with people who rely on their professional judgment and guidance in making decisions. These decisions are extremely important in accounting and more so that companies that have high ethical standard or main good ethical culture spend enormous time to train the staffs about the conduct that is expected of them.

Within a world driven by politics, many have discussed the impacts and consequences of accounting standards. The debate behind the creation of standards is a difficult topic. Should standards involve the bias of government and the people, or remain neutral from all influences? Many years ago accounting could have been considered non-political, but the ever-growing connection between public policy and business has placed pressures upon standard setters and the accounting community. The following paragraphs will debate if neutrality or politicization should be used to determine accounting standards.

Integrity – Accountants should always ensure that they are honest and straightforward in their activities with every instance that they have clients. They should always maintain the lines of duty and maintain business relationships during all official duties (Nobes, 2015).

It is incontestable that international financial reporting standards (IFRS) are in vogue and global conformity theoretically on the doorstep as about 100 countries implement standard financial regulations. The idea that uniform reporting standards have the same effect on financial reporting undervalues the contested ability to be flexible in financial reporting and introduces another level of debate on the issue of flexibility and uniformity. Apart from the fact that the merits of flexibility are downplayed to increase cross-sectional and inter-temporal comparison, prescribed reporting standards compliance is itself not enough basis to claim that financial reporting. The IFRS comprises of principle-based standards that have presents financial report manager with the opportunity to increase flexibility on their part and possible manipulation (Benston, 2006). Consequently, the fact brings another issue into question, for instance, the reliability and transparency of information produced under professional discretion and judgment of managers. This paper seeks to indicate that there are too many current financial reporting issues that are not yet conclusively included in the crusade for the adoption of uniform financial reporting standards on the notion that uniform standards improve the quality of financial reporting regarding comparability.

Lindberg and Beck (2002) claim that auditor independence is hailed as the “cornerstone” in the accounting profession as it is the core reason as to why the public trusts their professional opinion. However, since 2000, many accounting fraud scandals have negatively impacted public opinion on the legitimacy of the audit profession and, if in fact, its independence is uninfluenced by other parties. One of the scandals being the sudden collapse of Enron, given that a few months prior its bankruptcy its auditors Arthur Andersen, which was one of the five largest audit and accounting firms, claimed that Enron was financially healthy, but in fact they were paid off

Finance and Accounting is the only business function that accepts the responsibility to act I public interest. Hence the onus lies on the professionals to act in public interest and not restrict themselves to individual or the organisation.

Cable provider Adelphia was one of the major accounting scandals of the early 2000s that led to the creation of the Sarbanes-Oxley Act. A key provision of the Act was to create a stronger ethical climate in the auditing profession, a consequence of the apparent role that auditors played in some of the scandals. SOX mandated that auditors cannot audit the same companies for which they provide consulting services, as this link was perceived to result in audit teams being pressured to perform lax audits in order to secure more consulting business from the clients. There were other provisions in SOX that increased the regulatory burden on the auditing profession in response to lax auditing practices in scandals like Adelphia (McConnell & Banks, 2003). This paper will address the Adelphia scandal as it relates to the auditors, and the deontological ethics of the situation.

Additionally, many times the auditors are dealing directly with those in management while conducting their audit. This relationship is thought to create a conflict of interest which makes this type of reform much more complex than a requirement to change audit firms at regular intervals. Some also believe that increase turnover of auditors could affect the quality of companies’ audits.

Accounting is making it easier to then demonstrate the outcomes and results of the business. With that being said, it is very clear that it is crucial for the accounts to be accurate. For the business it is important for the various reasons. First of all the business wants to see how well it is doing every year, that includes it’s gross and net profit, the worth of its assets and liabilities, etc. The accuracy of this information is vital, as the organisation’s leadership can then analyse this information and make decisions according to the outcomes. Second of all if the accounts are being produced inaccurate or incorrect, the organisation will most likely make wrong decisions, which may lead it to the loss of money or even bankruptcy. Secondly accurate accounts will help the day-to-day operations of the business. However stakeholders are also interested in the accuracy of the accounts for the various reasons presented below:

There were many issues in this case but one of the main issues that stood out was the fact that Andersen there was a conflict of interest because Andersen was the auditor and consultant for Enron. There are positive attributes when auditing and consulting at the same time for a client such as building a relationship with the client and promotes business; allows the auditor to become familiar with the clients’ business environment, and reduces the overall cost of the client. However, when a firm audits and consults for their client, the audit/consulting firm works so closely to the client that it makes ethical decisions very difficult to make and the auditors lose objectivity and become partial due to the conflict of interest.

The purpose of this paper is to highlight the role of external auditing in promoting good corporate governance. The role of auditors has been emphasized after the pass of the Sarbanes-Oxley Act as a response to the accounting scandal of Enron. Even though auditors are hired and paid by the company, their role is not to represent or act in favor of the company, but to watch and investigate the company’s financials to protect the public from any material misstatements that can affect their decisions. As part of this role, the auditors assess the level of the company’s adherence to its own code of ethics.