Auditing and Assurance Services

This article discusses the risks and reasons for failure in Enron, Worldcom and Lehman Bros. It emphasizes the importance of quality management, trustworthy management, and decision-making process in operations management. The article also highlights the lessons learned from these failures.

Running head: AUDITING AND ASSURANCE SERVICES 1
Auditing and Assurance Services
Student’s Name
Institutional Affiliation

AUDITING AND ASSURANCE SERVICES 2
Auditing and Assurance Services
Risks associated with the fall of the three companies
Enron Company
Enron Company was unaware of the current profound trends witnessed in the industry as far as
accounting was concerned. The decline in the number of workers led to additional problems such
as increased stress among the few workers. It facilitated early retirements and low performance
by the workers. Enron Company had to incur the extra cost of establishing itself to increase the
number of the applicant. Methods such as job assurance upon successful completion were
necessary to escalate the number of young people to work in the textile industry. The strategy
was aimed at increasing the number of potential young workers to fill the gap left in the industry.
The process will take time and it is a risky adventure. The people trained people may decline to
join Enron Company due to cultures of the company and establish their enterprises. Different age
workgroups have different cultures and life style that rarely relate merge. Enron Company
requires to employ strategies to attract new workforce and well as ensuring a balance of the age
workgroups to prevent the emergence of the problem in future.
Worldcom
Operations management such as in the Worldcom entail designing, overseeing, production
process control and redesigning operations conducted in business to offer services and goods
(Knechel & Salterio, 2016). For instance, being in operations management comprise of insuring
a sufficient number of trained workers and effective maintenance of equipment. Others include
timely delivery of raw materials and efficient processes designing.
Lehman Bros

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Operations management in Lehman Bros is highly linked to other departments including
audit and accounting. Proper management streamlines all the departments stimulating the
production of output. Accurate prediction concerning staff needed usually emanate from the
human resource managers (Kolk & Perego, 2010). They are actively involved in enhancing the
skills of the workforce, proper recruitment and rendering continuous training. The accounting
department can ascertain the consequences of delayed payment and ensure prompt payment to
the bills to facilitate smooth running of the business. Finance department raises funds for
successful operations. With the proper response, the finance department unleashes high
productivity, proper scheduling and cost trimming. Their vibrancy in delivering timely and
quality products establishes a strong basis for marketing. Constraints in meeting the number of
units needed in the market lead to crumble of the marketing department. Operations management
is core in achievement of set targets in Lehman Bros.
Reasons for failure in Worldcom
Workplace stress
Workplace stress is a trend that is skyrocketing which can be attributed to human and economic
factors that are experienced today. Majority of the employees who are getting into the job
industry today are millennials who come from institutions of learning with high expectations
(Gander, Hartley, Powell, Cabon, Hitchcock, Mills & Popkin, 2011). When they secure a job
position and realize that the situation is different, stress starts to pile up. To some extent, the
managers have a role to play in the management of the workplace stress while also to some
extent it is out of their control. The managers and organizations can help the employees manage
workplace stress when they introduce motivation and reward system that favors the various

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individuals. The institutions should also play a part to ensure that those who get in the job market
can withstand the shocks which may be as a result of expectations.
Reasons for failure in Enron
a. Quality management
This quality of management when adequately utilized ensures that the resources are
appropriately managed for the benefit of the organization. The final description has been derived
from various aspects such as projected management, resource management, and human character
management. To be a manager calls for cultivating multiple needs of an individual in a way that
at the end of it they are satisfied.
b. Trustworthy:
Trustworthy is derived from the perspective that there business operations that require one to
be keen on a recording made such as financial documentation. Being responsible calls for one to
be accountable for all the processes that take place in an organization (Kheng, Mahamad,
Ramayah & Mosahab, 2010). Being a trustee implies that one can have control over the issues
that take place in business in terms of accounting.
Reasons for failure in Lehman Bros
a. Lack of enough funds. When there is not enough money to enable the organization to
meet the requirements of the clients, it will be a challenge since not all clients can
understand that, and some cannot wait for long due to their trust in the organization.
b. Lack of corporation. When there is no unity in the running of the organization, it will
result to failure.

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c. Lack of support. When there is no support from the government and other employees in
the organization, the management will feel discouraged, and the work will not be good
since he is doing all alone (Elder, Beasley & Arens, 2011).
What is it exactly that undermines auditor independence?
The organizations has to change the mode of operations management to attract and retain the
customers. The companies has to carefully consider the following as they undermines the
auditor’s independence:
Assigning meaningful work- purposeful and meaningful work usually keeps the current
generation of auditors engaged. They employ passion to the companies that provide compelling
purpose. Highly engaging work assures values and interest. The operations management in the
company should work to incorporate challenging environment for the auditors (Naik, Gantasala
& Prabhakar, 2010). Personal enrichment should be kept in reaching the young workforce and
the companies should work to meet these promises.
Focus change and communication- Values and mission are key motivating factors to the
auditors as opposed to money and profits gained. The values ought to be motivating, authentic
and altruistic to secure success. The vision of the organization needs to be clear for the young
generation for propels it continuously. Various modes of communication indicated that an
organization is vibrant. The companies needs to improve internal communication and ensure all
necessary information is convey to the clients immediately (Perego & Kolk, 2012). The methods
used by the manager such as hall meetings, websites, handbooks and memos among others need
to reflect the vibrancy of the organization. Areas to focus on include marketing and the number
of goods sold daily and absorption level in the market.

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Participation in social media and technology enhancement- Auditors strongly embrace
technology such the social medial advancement. They constantly utilize online information as
technology integrates all aspects of life. The organizations have to continuously modify the
technology used in the company incorporating the latest advances for easier and effective output
delivery. The company needs to utilize the social media extensively such as Facebook. It will
secure the interest of the young generation constantly visiting the social media to give their view
concerning a particular company. Increased positive complements will boost their reputation of
the industry establish the young generation to seed the need for pursuing textile course out of
free will.
Creation of interactive, fun and collaborative working environment- the organizations
should allow freedom of the auditor’s workforce. They usually adore relationship building,
feedback reception from friends, and collaborating with the entire workforce. The like in
participating in groups that do not observe dire seriousness and that allow funny interaction and
activities. The workforce in the current generation yarns for interaction with the managers,
attention and feedback. This provides an opportunity for mentorship and sharing. The operation
system should enable a conducive ground for the auditors to function effectively.
Continuous improvement- Auditors constantly desires to advance in their career. The
organizations should avail key opportunities for their young employees to grow, learn and to
diversify their capabilities (Whittington & Pany, 2010). They highly appreciate advancement in
career compared to the older generation. The company will be able to secure loyalty and release
their intrinsic motivation for increased production in the industry. The company to take to
account the dreams of the organization. They dream of independence, flexibility and idealism in

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their path of life after working with a given company for some time. The company should
maximally utilize the vigor of auditors before their personal establishment.
Lessons Learned
In Worldcom quality management defines the acceptable quality level to meet the customer
demands through the work process and deliverables. Quality management ensures that
requirements and standard are achieved through the application of quality tools, control measures
and adhering to the responsibilities. Documentation of the work to be performed is key to
monitoring non-conformances and corrects them. Worldcom Company had quality management
plan, but the problem that was impending was not easy to detect under the normal routine and
without prior research concerning the workforce.
In Enron Company, leaders face numerous problems in the process of decision-making.
They encounter many uncertainties such as in the case of Enron Company. The management was
not aware the customer holds negative perception concerning their products and replacement in
future will pose immense challenges. Managers are subject to complexities and high-risk
consequences (Sater, Chien & Druta, 2014). The choices to take may be correlated making it
difficult to determine the best. Poor choice may result in enormous loss of resource and the one
undertaken by Enron Company of training and sponsoring the interested young individual.
Violation of the terms will result in enormous loss of resources and time. Also, alternatives to be
considered pose challenges due to uncertain consequences (Louwers, Ramsay, Sinason, Strawser
& Thibodeau, 2015). The manager has the task of prediction how a particular group of
individuals will react in a given circumstances. Interpersonal issues are also subject to error.
Also, in Lehman Bros, the decision-making process is consuming action and requires
collaboration from all the members to secure success. They usually reflect the competence of a

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leader and unveil underlying issues. Due to dynamism that exists in business, managers are
compelled to constantly make viable decisions to streamline the operations of a company (Nolan,
& Thurber, 2010). The process involves identification of a problem face, limitations, alternatives
to take, reliable alternative, decision implementation and system for control and evaluation. To
reveal underlying problems managers required adequate time, information and personnel to aid
in the process. The budget for workforce trend investigation was not available in the Lehman
Bros.
To summarize the lessons learned, it is evident that the general managers focused on
marketing and technological improvement for increased production and neglected one of the key
factors in production, the workforce. Information concerning the current trend of the new
generation is limited. The performance and quality control manager had just to make a decision
based on general observation that is not effective. The process of determining the best alternative
required brainstorming from various manager. They have to present various alternative likely to
eradicate the current problem encompassing the company. In unison, they need to choose the
best solution and the best method for execution. The process is cumbersome and may take long
duration but yields to the expectations when carefully conducted. To reduce the time required for
decision-making process discipline had to be observed. The decision makers have to concentrate
on the problem at hand. All need to refrain for analyzing other contribution or highlighting their
weaknesses. They conducted decision making concerning improvement and training of
workforce at a late stage, managers responded to the problem. Decision-making allows the
employees to feel satisfied, hence supporting the entire process (O’Dwyer, 2011). Different
contributions from stakeholders reduce the chances of failure of the decision made. However,
implementation of the agreed decision poses challenges to the accountability. Members holding

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the opinion of groupthink conforming slowly to the decision made. Solely the manager in charge
of a company or using key workforce can make a decision. It is affected by the task nature, group
member’s abilities and the relationship between the managers and the workforce.
References
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