Case1.1 Enron Corp

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Enron Corporation

Question 1,
In my point of view, the parties are most responsible for the “crisis of confidence” on the part of the public in the accounting profession as following. • The parties who create these auditing standard rules, such as SEC, Auditing Standard Board. They should publish the Sarbanes-Oxley Act earlier. They should be considered the non-auditing services for auditing clients is a serious issue earlier. • The auditors of the Andersen firm. They didn’t do their responsibility and didn’t follow professional standard rule. • The high level of managers of the Andersen firm because they didn’t train their auditors well. They may ignore some important ethical principles and only pay attention how to make their revenues.

Question 2,
Three types of consulting services that audit firms have provided to their audit clients in the recent years which indicate the special threats for audit firm’s independence are as following. • Financial information systems design and implementation. Once the financial information systems have been designed, it needs to maintain and update in many situations. If auditors design the systems for the clients, they would take too much power to control clients business. • Internal audit outsourcing service. Usually, the internal auditors have to assistance external auditor during the audit. If internal auditor also is external auditor, the external auditor independence will be impaired. • Human resources. If the external auditors act like a leader in the client’s firm, it will affect client’s business.

Question 3,
Given the assumption, I do believe that Andersen’s involvement in those decisions violated many professional auditing standards. • Independence. Report shows that Andersen billed Enron $335,000 for its works related to Raptors only in the first several months. Public reports that Andersen earned $52 million from Enron, but only $25 million related to auditing works...
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