Business / Audititng: Enron Case Study

Audititng: Enron Case Study

Autor:  Paul  04 April 2011
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Question 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 whom you believe are most responsible for that crisis. Briefly justify each of your choices.

The basic meaning of the words, "crisis of confidence" stems from America being forced into a financial dilemma that has taken place over a period of about 20 years. This financial crisis slowly developed and quickly picked up speed once the Enron scandals were publicized. The level of belief, trust and assurance in the Enron's way of financial security was lost. Thus, America's confidence came crashing down along with the billions they lost in investments, retirement funds, and jobs.

Everything starts at the top and trickles down to the ladder. Because the scandal(s) took place over consecutive CEO positions, those involved over the past 20 years, all have a hand in being responsible for the noted fraud of the company. I feel that the CEO's are to blame for this cause of disbelieve among the American society, because they knew about the inflated profits, reported financial conditions had sustained substantially by institutionalized, systematic, and creatively planned accounting fraud along with many other reported company downfalls. Then there are the numerous failures by the board and central management, including the failure to stop Enron from using misleading accounting, the failure to ensure the independence of the company's auditor, Arthur Andersen, and the failure to protect shareholders from unfair dealings in an outside partnership run by the company's chief financial officer. And finally, the Enron accountants who incorrectly listed third party investments notes as receivable on balance sheets which later caused billions of invested dollars to be lost. The accounts were able to scam and provide misleading finical accounts to the National Securities Markets, investors, stockholders, creditors, and central public. These are the three main groups of individuals that I would say are responsible for the largest corporation bankruptcy in U.S. history which inevitably caused the America's to go into a "crisis of confidence."

References:

Knapp. Contemporary Auditing, Real Issues & Cases, 7th ed. Pgs. 3-20., http://en.wikipedia.org/wiki/Enron,

Enron Case

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