Case 1.1: Enron DOCX

Title	Case 1.1: Enron
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Case 1.1: Enron 1. 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 the most responsible for that crisis. Briefly justify each of your choices. Executives of Enron - K...

Description

Case 1.1: Enron 1. 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 the most responsible for that crisis. Briefly justify each of your choices. Executives of Enron - Kenneth Lay, Jeffery Skilling, and Andrew Fastow were all responsible for the crisis. The executives of Enron orchestrated the big earnings and pushed up the stock prices for their own benefit. When misstatements and irregularities emerged and were made clear to the public, the executives of Enron lost the confidence of the stakeholders in the company and the crisis of confidence spread. Arthur Andersen - The auditing firm did not present itself with the professionalism and responsibility that an audit firm should. When the firm noticed that the amounts recorded on Enron's financial statements were misstated, it was ignored in order to continue receiving the enormous amounts of fees and payments from the corporation. In doing so, the confidence that the public had in the company was diminished. SEC - The government agency who allowed Enron to use Mark-to-Market Accounting practice. This kind of creative accounting practice allowed the Enron CEO to perform his Ponzi scheme "legally" and led to the sudden collapse of Enron. 2. List three types of consulting services that audit firms have provided to their audit clients in recent years. For each item, indicate the specific threats, if any, that the provision of the given service can pose for an audit form's independence. "Internal Auditing" should be conducted within a company instead of having an outside audit firm to perform the service. If an outside audit firm was hired then it will present a threat to the legitimacy of the internal audits. An audit firm should not be "Designing Accounting Systems" for a firm while performing audit services to the same firm. It is too easy for the audit firm to alter the accounting systems within a company, an auditor can fabricate the financial situations of a corporation and make it appears to be more profitable or more attractive to investors. An outside audit firm should not provide "Professional Consulting" and auditing service to a same company. Auditors involved in the dealings of a business are at risk for becoming subjective to the success of that organization. When an auditor is involved in such happenings, they are not able to perform their duties as an external auditor to the best of their ability. Their opinions are subject to change based on biases....