Comprehensive Audit Case 1.1 Enron
Comprehensive Case 1.1 Enron
1. There were several parties responsible for the "crisis of confidence" created by the Enron debacle. Enron's executives were responsible for their behavior in trying to adjust their financial statements. Andersen's auditors were responsible for not doing their jobs with integrity and not keeping their independence in from Enron. Regulatory groups were responsible for making sure that companies and auditors are following rules for the sake of users of financial statements. 2. Three types of consulting services that audit firms are now prohibited from providing to clients that are public companies include information technology work, appraisals and valuation services, and internal audit outsourcing services. Auditors are no longer allowed to offer such services while auditing a company because they would be auditing their own work or be put in a situation where they would want to alter an audit based on their other work with the company. 3. Andersen's involvement in the decisions concerning Enron's accounting and financial reporting did violate professional auditing standards. Andersen violated the auditing standard of independence. Andersen was involved in other areas of Enron's company that made them audit work that they were a part of so they were no longer independent of the audit information. Andersen violated the auditing standard of planning and supervision by not appropriately planning the audit and supervising the audit to find that they were too involved in the accounting of Enron to complete the audit. Andersen also violated the auditing standard of adequacy of disclosures by allowing Enron to use intentionally vague disclosures about their Special Purpose Entities. 4. Professional auditing standards referring to the preparation and retention of audit work papers require that there is proper planning of the audit work
1. There were several parties responsible for the "crisis of confidence" created by the Enron debacle. Enron's executives were responsible for their behavior in trying to adjust their financial statements. Andersen's auditors were responsible for not doing their jobs with integrity and not keeping their independence in from Enron. Regulatory groups were responsible for making sure that companies and auditors are following rules for the sake of users of financial statements. 2. Three types of consulting services that audit firms are now prohibited from providing to clients that are public companies include information technology work, appraisals and valuation services, and internal audit outsourcing services. Auditors are no longer allowed to offer such services while auditing a company because they would be auditing their own work or be put in a situation where they would want to alter an audit based on their other work with the company. 3. Andersen's involvement in the decisions concerning Enron's accounting and financial reporting did violate professional auditing standards. Andersen violated the auditing standard of independence. Andersen was involved in other areas of Enron's company that made them audit work that they were a part of so they were no longer independent of the audit information. Andersen violated the auditing standard of planning and supervision by not appropriately planning the audit and supervising the audit to find that they were too involved in the accounting of Enron to complete the audit. Andersen also violated the auditing standard of adequacy of disclosures by allowing Enron to use intentionally vague disclosures about their Special Purpose Entities. 4. Professional auditing standards referring to the preparation and retention of audit work papers require that there is proper planning of the audit work