Enron Case 1.1
1. The top management of Enron including Kenneth Lay, Jeffrey Skilling and Andrew Fastow. These managers created a tone at the top of Enron that allowed and encouraged accounting that mislead investors. The audit team at Anderson and especially David Duncan the lead partner for Enron’s audit holds responsibility. Anderson was negligent in finding problematic accounting used by Enron. In addition, Anderson made millions on consulting services provide to Enron which makes their independence for Enron come into question. The governing body of publicly traded companies for not regulating the use of SPE’s to hide debt and a lack of governance of internal controls.
2. Legal and expert services create threats for audit independence. By providing these types of services a CPA will be trying to create value for the company by aiding them in legal and expert matters. This will impair independence because they will be motivated to give an unqualified opinion so that they will be able to continue to conduct consulting services. Designing and implementing financial information systems by an auditor. This is problematic because auditors are responsible for auditing internal controls. Many controls are built into information systems. This type of activity would be problematic because the auditor would be auditing work that the firm has done which would lack independence. Bookkeeping services done by the auditor for the audit client. The purpose of an audit is to provide an opinion on the financial statements for external users. If the auditor was preparing financials then it would be nearly impossible for them to conclude that the statements do not fairly represent the client’s financial position.
3. Since the Enron scandal the auditing standards have changed significantly. Therefore we have analyzed this question with today’s new auditing standards. Anderson violated many professional auditing standards with their involvement in Enron’s
2. Legal and expert services create threats for audit independence. By providing these types of services a CPA will be trying to create value for the company by aiding them in legal and expert matters. This will impair independence because they will be motivated to give an unqualified opinion so that they will be able to continue to conduct consulting services. Designing and implementing financial information systems by an auditor. This is problematic because auditors are responsible for auditing internal controls. Many controls are built into information systems. This type of activity would be problematic because the auditor would be auditing work that the firm has done which would lack independence. Bookkeeping services done by the auditor for the audit client. The purpose of an audit is to provide an opinion on the financial statements for external users. If the auditor was preparing financials then it would be nearly impossible for them to conclude that the statements do not fairly represent the client’s financial position.
3. Since the Enron scandal the auditing standards have changed significantly. Therefore we have analyzed this question with today’s new auditing standards. Anderson violated many professional auditing standards with their involvement in Enron’s