Enron Corporation Audit

Question 1

In any audit, a failure to obtain adequate evidence will result in giving an incorrect audit opinion on the true and fairness of financial statements. Give 2 possible consequences of issuing wrong audit opinions (1 slide)

1. Auditors can be legally liable when they were issuing wrong audit opinions. So that they are very careful when it comes to issuing an opinion.

Question 2

Select a real case on how non-technical issues have impacted the accounting profession. Only 2 slides allowed (multiple overlapping images in any single slide is not allowed)

Enron Corporation is an energy firm in Texas which well-known example of willful corporate fraud and corruption. Its stock had grown quickly and the board of directors was satisfied with management. Enron’s top managers chose stakeholder deception and short-term financial gains for themselves, which destroyed their personal and business reputations. However, that management was keeping two sets of record. Then, use accounting loopholes, special purpose entities, and poor financial reporting to hide billions of dollars’ worth of debt from failed deals and projects.

An ethical issue is the role of controlling management. Management seeks to enrich itself while the board seeks to enrich its stockholders. The board of directors seemed uninterested in questioning management. CFO and other executives misled Enron’s board of directors and audit committee on high-risk accounting practices, and also pressured their audit firm to ignore the issues. Also, Arthur Andersen is a major accounting firm had been complicit in this deception with Enron. The conflict of interest between auditors and firms.

Enron is violated the five of following fundamental principles of professional ethics. First is integrity, profession account should