Importance of Auditor's Professional Liability: Analysis of Enron Scandal

Running Head: AUDIT, ASSURANCE AND COMPLAINCE
AUDIT, ASSURANCE AND COMPLAINCE
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Author Note

1AUDIT, ASSURANCE AND COMPLAINCE
Executive Summary
The aim of this assignment is to analyze the importance of the auditor’s professional
liability as well as the negative publicity that creates for the professions as a whole. For this,
analysis will be done on the scandal of Enron that was known by all in the year 2001.
Houston based company, Enron was American energy firm. Hence, under this analysis,
discussion will be based on the brief description as well as the factual issues behind the case.
Further, discussion will be based on the responsible parties and damages imposed on them.
Moreover, relevant issues in the auditing and accounting raised by the case will be discussed.
In addition, root causes of the issues and the problems and misrepresentations by the
defendant will be discussed. Lastly, recommendation as well as possible improvements will
be provided to the auditor. Therefore, it can be said that, the auditor is responsible for
maintaining their professionalism by detecting any fraudulentmisstatements of the corporate
business by adhering to the accounting and auditing rules and regulations and formulations of
the effective audit strategy, program and other effective measures.

2AUDIT, ASSURANCE AND COMPLAINCE
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Brief Overview and Factual Issues of Case...........................................................................3
Responsible Parties................................................................................................................5
Investigation and Explanation of the relevant Issues in Auditing and Accounting...............6
Root-Causes of the Issues......................................................................................................8
Misrepresentation made by Defendants.................................................................................9
Recommendations and Possible Improvements...................................................................10
Conclusion................................................................................................................................11
Reference..................................................................................................................................13

3AUDIT, ASSURANCE AND COMPLAINCE
Introduction
The aim of this assignment is the analysis on the audit, assurances and compliance.
This assignment will discuss importance of the professional liability to the auditors as well as
the negative publicity that creates for the professionals as a whole. The recent case of Enron
scandal will be discussed, where the audit firm was sued for the professional negligence.
Enron Corporation which was company based in Houston have their services in commodities,
services and American energy. Enron was founded in year 1985 by the merger of Inter North
as well as Houston natural gas that was two regional small companies (Cumming,
Dannhauser and Johan 2015). Therefore, under this assignment discussion will be based on
the brief overview of the case and factual issues that was behind the case. In addition,
discussion will be done on parties who are responsible for the occurrence of the scandal,
damages imposed as well as their appropriateness. Further, discussion will be done on the
investigation and the explanation of the relevant issues in the auditing and accounting raised
by the case. Moreover, root-causes of the issues will be discussed. In addition, problems and
misrepresentations made by the defendants that have contributed to the adverse judgements
and awarding of the damages will be discussed. Lastly, recommendations as well as
possibility of improvements in relation to the case will be discussed (Markham 2015).
Discussion
Brief Overview and Factual Issues of Case
Case Overview
Enron Corporation has gained the success very fast and it has faced downfall with the
same speed of the success. The downfall of the company has affected thousands of people
and the employees of the company. The share was at the worth of $90.75 at the peak of the
Enron, but it was at $0.26 at the time when it was declared bankrupt (Kumar and Aldous