Accounting Research: Lessons from Enron, WorldCom, Adelphia and Tyco

Running head: ACCOUNTING RESEARCH
Accounting Research
Name of the Student
Name of the University
Author’s note

ACCOUNTING RESEARCH1
Introduction of the fraud cases
The main objective of this report is to bring about a discussion regarding the different
fraud cases that led to the formation of SAS 99 and CAS 240, which are standards set up for
the auditors to examine the fraud throughout the entire process of audit. In this context, the
fraud cases that are analysed are Enron case, WorldCom case, Adelphia case and Tyco case.
Enron case depicts a scandal where the auditors have shown a negligence in their part
and have brought about a large number of errors in the process (Dibra, 2016). WorldCom
case shows a similar picture where the internal auditor has been alleged to have involved in
the case. In the case of Adelphia, the auditors were not accused. The main alleged people
were the Executives and the Founders of the company. Considering the case of Tyco, the
company has been alleged to have taken advantage of its acquisition activity for fooling the
investors.
Historical lesson learnt from these fraud cases
CAS 240, that is, the Canadian Auditing Standard was set up in order to examine and
analyse the responsibilities of the auditors while detecting any fraud in the financial
statements of the company (Byrnes, et al., 2018). Due to fraud or error there can be
occurrence of misstatements, which might either be intentional or unintentional. The same
principle goes for SAS 99 which requires the auditors to make sure that all the financial
statements are materially correct.
The different fraud cases, like Enron, WorldCom, Tyco and Adelphia provides very
good examples for examining the duties and responsibilities of the internal as well as external
auditors. It has been learnt from the examples of these cases that it is the duty of the auditors
to investigate all the important financial statements related to the companies even the
companies seem to be working well in the external environment (Nguyen, 2014).

ACCOUNTING RESEARCH2
Considering the duties and responsibilities of the external auditors, it is learnt that they have
not performed their functions with integrity, honesty as well as independence. Though they
are supposed to have an objective and also an unbiased mind set, still they have not shown
such qualities in the investigation of the financial materials of the companies. These lessons
that have been learnt from the fraud cases like Enron, WorldCom, Tyco and Adelphia have
served as a reminder for not committing the same mistakes in the future days (Nguyen,
2014). The auditors must perform their duties effectively such that the common people can
enjoy their rights and the companies are free from any kind of corruption relating to their
financial matters.
Description of the journal articles that have explained these fraud cases
The important papers that talk about the fraud cases of Enron, WorldCom, Adelphia
and Tyco, have been extracted and thoroughly analysed.
First paper talks about the case of Enron and has been named as “The Case of Enron”.
The Enron scandal has been described in details and the causes are also elaborated that
eventually led to the bankruptcy of the Enron Corporation (Dibra, 2016). The different
causes of the scandal have been lack of truthfulness shown by the management and they did
not completely disclose their financial information to their investors, employees and the
shareholders. There has also been conflict of interest and lack of oversight of the
management. Another important cause was the audit failure of the company where Arthur
Andersen had been accused of being involved in the fraudulent activities.
Taking into account paper denoting the case of WorldCom, the auditor reflected a
lack of independence and awareness about the activities of the board. The auditors did not
conduct meetings and discuss about the progress of the findings from the financial statements
(Gottschalk, 2016). Nor did they resolve any conflict that might occur between the