The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis. Briefly justify each of your choices. Following parties are believed to be the most responsible for the crisis. With any big organization going so bad, the blame starts with the top level executives, there was no different in this case. For Enron the blame started with Enron’s executives, Kenneth Lay, Jeffrey Skilling, and Andrew Fastow. Their goal was to make Enron into the world’s greatest company. To make this goal a reality, they created a company culture that encouraged “rule breaking” and went so far as to “discourage employees from reporting and investigating ethical lapses and questionable business dealings”. They insisted the employees use aggressive and illegal accounting procedures. Anderson was also responsible because they allowed Enron to use these fraudulent statements for 15 years. It is the auditor’s responsibility to question any unusual circumstances and reports and they failed to do so. They should have questioned the SPEs, should have noticed that notes receivable were reported wrong, and should have noticed that there was no internal control being practiced. Also, Anderson should never have practiced consulting services for a company that they audited.
Identify and lists five recommendations that have been made recently to strengthen the independent audit function. For each of these recommendations, indicate why you support or do not support the given measure.
The ways company is governed today have gone on for a change given the reform in audit functions and the likes. As it is with the case, effective financial reporting is the sole concern of companies. Hence, in recent development there has been a dramatic shift towards corporate governance, because the capital market mostly feeds on the effectiveness of corporation and their governance internally or by independent audit firms. The stake when it matter to the independent function of audit also is much higher. A list of the five recent recommendations is summed up as follows: 1.
Rationalizing work program in detecting fraudulent and misappropriation of financial statements for the sake of stakeholder, the company and the economy at large. 2.
Strengthening the infrastructure stock exchanges that should be able to meet the requirement of the current scenario in auditing process. 3.
Self-evaluation of companies, that is to say the core and basic idea of corporate governance that is subject to public review. 4.
Improving the effectiveness of Audit committee
Raised membership and sole audit committee responsibility and authority in the composition of audit regulation and the likes. Hence when it comes to these five recommendations in general perspective to the function of audit, such measure adds to the values and ethics attached to accounting profession. In order to make way for change and improved the effectiveness, these above recommendation are likely to work its ways in strengthening the core principle attached to audit functions. However, corporate governance also at times is subject to public outcry. That so to say, the concept of corporate governance at most times take leverage to propagate a clean image in the market. Hence, the idea of corporate self-evaluation is not well in the line in strengthening independent audit function, because it is likely to be misappropriated. But when it matter to the remaining four general recommendations, there is some assurance that such given measure can work wonders that should display audit committees best practices in the monitoring process, internally and externally.
Do you believe that there has been a significant shift or evaluation over the past several decades in the concept of "professionalism" as it relates to public accounting discipline? If so, explain how...
Please join StudyMode to read the full document