Enron Break Analysis
Asking the Right Questions?
Lecture 12
Learning Objectives
• Ask Why, Asshole? • Identify the types of threats professional accountants encounter and identify ways of minimising these. • Outline the disciplinary procedures for accountants. • Discuss the role of ethics in a global environment
Enron: The Smartest Guys in the Room?
Threats to Accountants
• Code of Ethical Conduct • Compliance with these principles may be undermined by the following 5 threats from APES 110: • Self-Interest Threat
▫ may occur as a result of the financial or other interests of a member or of an immediate or close family member. A direct material interest in an audit client. A loan from a client.
• Self-Review Threat
▫ may occur when a previous judgment needs to be reevaluated by the member responsible for that judgment. An audit team member having recently been a director of the audit client.
Threats to Accountants
• Advocacy Threat
▫ may occur when a member promotes a position or opinion to the point that subsequent objectivity may be compromised. Dealing in or promoting shares in the audit client.
• Familiarity Threat
▫ may occur when, because of a close relationship, a member becomes too sympathetic to the interests of others. An audit team member has a family member who is a director of the audit client. Acceptance of a gift or preferential treatment.
• Intimidation Threat
▫ may occur when a member may be deterred from acting objectively by threats, actual or perceived. Threat of replacement over a disagreement with the application of an accounting principle. A dominant personality attempting to influence the decision making process, such as the awarding of contracts
Professional protection against threats
• Safeguards created by the profession, legislative acts and/or regulation
▫ Greater ongoing ethical education in the profession. ▫ Example of Corporate Governance is CLERP 9, which is similar to Sarbanes-Oxley Act (U.S) and
Lecture 12
Learning Objectives
• Ask Why, Asshole? • Identify the types of threats professional accountants encounter and identify ways of minimising these. • Outline the disciplinary procedures for accountants. • Discuss the role of ethics in a global environment
Enron: The Smartest Guys in the Room?
Threats to Accountants
• Code of Ethical Conduct • Compliance with these principles may be undermined by the following 5 threats from APES 110: • Self-Interest Threat
▫ may occur as a result of the financial or other interests of a member or of an immediate or close family member. A direct material interest in an audit client. A loan from a client.
• Self-Review Threat
▫ may occur when a previous judgment needs to be reevaluated by the member responsible for that judgment. An audit team member having recently been a director of the audit client.
Threats to Accountants
• Advocacy Threat
▫ may occur when a member promotes a position or opinion to the point that subsequent objectivity may be compromised. Dealing in or promoting shares in the audit client.
• Familiarity Threat
▫ may occur when, because of a close relationship, a member becomes too sympathetic to the interests of others. An audit team member has a family member who is a director of the audit client. Acceptance of a gift or preferential treatment.
• Intimidation Threat
▫ may occur when a member may be deterred from acting objectively by threats, actual or perceived. Threat of replacement over a disagreement with the application of an accounting principle. A dominant personality attempting to influence the decision making process, such as the awarding of contracts
Professional protection against threats
• Safeguards created by the profession, legislative acts and/or regulation
▫ Greater ongoing ethical education in the profession. ▫ Example of Corporate Governance is CLERP 9, which is similar to Sarbanes-Oxley Act (U.S) and