Auditing Theory and Practice: Enron and HIH Insurance Scandals

Running Head: AUDITING THEORY AND PRACTICE
AUDITING THEORY AND PRACTICE
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1AUDITING THEORY AND PRACTICE
Executive Summary
The occurrences of the corporate collapses have revealed the weakness in the corporate
governance system in the business organizations. The occurrences of the corporate collapse
does not occurs instantly rather it involves gradual process that means the signs as well as
symptoms are developed over the passing years. Hence, this report will discuss, two major
corporate collapses that is of Enron Corporation and HIH Insurance. Therefore, at the end of
the report, it has been analyzed that development of the standard relating to accounting and
auditing practices as well incorporating strong corporate governance that is important for
reducing the occurrence of the corporate collapses.

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Table of Contents
Task 1.........................................................................................................................................4
Introduction................................................................................................................................4
Discussion..................................................................................................................................4
Corporate Collapses...............................................................................................................4
Collapsed Companies Auditor...............................................................................................5
Analysis of Audit Procedures that Contributed to Collapses.................................................6
Auditors Independence and Professional Ethical Behavior...................................................6
Improvements taken Place in Auditing Standards and Principles after Collapse..................7
Recommendations..................................................................................................................7
Conclusion..................................................................................................................................7
Task 2.........................................................................................................................................8
Introduction................................................................................................................................8
Discussion..................................................................................................................................8
AAA Model............................................................................................................................8
Determination of Facts...........................................................................................................9
Definition of Ethical Issues..................................................................................................10
Identification of major principles, rules and values.............................................................10
Specification of Alternatives................................................................................................11
Comparison of Values and Alternatives..............................................................................11
Assessment of Consequences...............................................................................................12
Making the Decision............................................................................................................12

3AUDITING THEORY AND PRACTICE
Conclusion............................................................................................................................12
Reference..................................................................................................................................13