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Analysis Of The Enron Scandal

You are required to write a short learning journal reflecting on the following items:

1. The issues surrounding Enron and its auditor “Arthur Andersen” (by reading the Case study, Chaney and Philipich (2002) paper with reference to the course materials from Week 1 to Week 2, inclusive.

2. The findings in the research paper (Ruhnke and Schmidt (2014) and the course materials from Week 3- Week 5, inclusively, specially the materials related to the elements of Audit Risk Model. 

Sample Answer

Introduction

The Enron scandal is one of the leading corporate collapse of the modern era. Enron’s auditor is held responsible for the manipulation that they have done in the accounting policies of the company. From the analysis of the research paper of the Ruhnke and Schmidt it is explained the losses happened to the stakeholders due to the unethical behaviour of the audit firm of Enron.

The Issues Surrounding The Enron And The Auditor Of The Company.

The issue surrounding the Enron and the auditor of the company are stated below

Auditing Issues

 If the auditor take unfair means while auditing the company’s financial statements then it will affect the interest of the stakeholders (Ojo 2015). The auditors has violated the major principles of the IAASB like,

  • Supporting the global financial stability.
  • Enhancing the quality and standard of auditing.
  • Implementations of the standards of auditing in the organisation(Council 2015).

Accounting Issues.

  In case of Enron the auditors though found that the company is not following any principles of GAAP as well as they have violated all the principles of the international auditing and assurance standards board , but they does not inform it to the stakeholders which results in to the failure of the company (Bhasin, 2016). 

 

The Findings From The Research Of Ruhnke And Schmidt Are Stated Below

Misstatements In The Financial Statements

From the research work of Ruhnke and Schmidt it is observed that both Enron and the auditor of the company are equally responsible for the misstatements of the financial statements of the company and the financial transactions are not made in accordance with the principles of the GAAP. The company also violates the principles of IAASB(the international auditing

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