Auditors Role in Enron
MANAGERIAL ACCOUNTING ASSIGNMENT NO1
STUDENT:0705080/1
QUESTION 1 (B) Evaluate the auditor's role in the certification of the financial statements and conclude whether its work is effective in preventing major scandals on the lines of Enron and Worldcom.
1.0 ABSTRACT
2.0 ENRON-CORPORATE FIASCOS
3.0 HOW DID THE AUDITORS FAIL TO CATCH PROBLEMS AT ENRON?
4.0 HOW TO PREVENT RECURRENCE OF ENRON?
5.0 NEW RESPONSIBILITIES OF AUDITORS ACCORDING TO SARBANES-OXLEY ACT 2002
6.0 CONCLUSION
7.0 REFERENCES
1.0 ABSTRACT The responsibility of an auditor is to express an opinion on the financial statements based on his audit which means verification or check in accordance with International Standards on Auditing. These standards require that the author complies with ethical requirements and performs the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
2.0 ENRON-CORPORATE FIASCOS
Enron was established in 1985 following the merge of Houston Natural Gas and InterNorth. In year 2000, Enron reported a remarkable growth of revenue of $ 100.8 billion, putting it at number seven in the Fortune 500 list of the country’s biggest companies.
STUDENT:0705080/1
QUESTION 1 (B) Evaluate the auditor's role in the certification of the financial statements and conclude whether its work is effective in preventing major scandals on the lines of Enron and Worldcom.
1.0 ABSTRACT
2.0 ENRON-CORPORATE FIASCOS
3.0 HOW DID THE AUDITORS FAIL TO CATCH PROBLEMS AT ENRON?
4.0 HOW TO PREVENT RECURRENCE OF ENRON?
5.0 NEW RESPONSIBILITIES OF AUDITORS ACCORDING TO SARBANES-OXLEY ACT 2002
6.0 CONCLUSION
7.0 REFERENCES
1.0 ABSTRACT The responsibility of an auditor is to express an opinion on the financial statements based on his audit which means verification or check in accordance with International Standards on Auditing. These standards require that the author complies with ethical requirements and performs the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
2.0 ENRON-CORPORATE FIASCOS
Enron was established in 1985 following the merge of Houston Natural Gas and InterNorth. In year 2000, Enron reported a remarkable growth of revenue of $ 100.8 billion, putting it at number seven in the Fortune 500 list of the country’s biggest companies.
References: Elliot & Elliot, Financial Accounting and Reporting (2007), Page 780 Fox, L. (2003) Enron: The Rise and Fall, Jon Wiley & Sons, Inc. pp.221 Harshbarger, S. (2002) Unaccountable all over in Enron (p.1) ENRON CORP, FORM 8-K, Current report pursuant to section 13 or 15(D) of the securities exchange act of 1934 (filed 8 Nov 2001) Hall and Renner, 1991 :Lessons auditors ignore at their own risk, journal of accountancy June 63-71 Barrett, Enron:Corporate Fiascos and their implications Barrionuevo & Weil,Partner wanted Arthur Andersen on Enron audit, 2002 M. Barrett, Enron:Corporate Fiascos and their implications, papers.ssrn.com/sol3/papers.cfm?abstract_id=794831 Macconnell Jnr & G Banks http://www.aicpa.org/pubs/jofa/sep2003/mcconn.htm Banks-How Sarbanes Oxley will change the audit process,