Question

what was the role in the Enron case of the independent auditor, audit committee and internal auditors?

Answer 1

The role in the Enron case of the independent auditor, audit committee and internal auditors was as under:

The purpose of the audit is to determine whether a company's financial statements fairly reflect its condition, within the broad parameters of what the professionals call ` generally accepted accounting principles '.

Anderson, for example has acknowledged that the partener who ran its audits at Enron ordered the destruction of certain documents after it was learned that federal regulators were investigating Enrons financial practices. So, Anderson fired the partener.

At Enron, Anderson was paid $25 million for audit the books and an additional $27 million for consulting.

One of the Andersons consulting services at Enron was to provide internal auditing services, which means one arm of Anderson was responsible for generating financial reports that were audited by another arm-a potential conflict of interest within a conflict of interest.

Enron was one of the biggest and , it was thought, one of the most financially sound comoanies in the U.S.

The various misdeeds and crimes that Enrons officers and employees committed were extensive and ongoing. Particularly damaging misrepresentations produced inflated earning reports for shareholders, many of whom eventually suffered devastating losses when the company failed.

In response to what was widely seen as collusion between Enron and public accounting firm Arthur Anderson & Co. concerning Enrons Fraudlent behavior, SOX also changed the way the corporate boards deal with their financial auditors.

All companies, in accordance with SOX, must now provide a year end report regarding the internal controls they have in place and the effectiveness of those internal controls.