Auditing Issues and Collapse of Enron

Running Head: MANAGEMENT ACCOUNTING 2
0
Management
Accounting 2

MANAGEMENT ACCOUNTING 2 1
Memorandum
To:
From:
Date:
Re:
Auditing issues and collapse of Enron warns former ASIC boss
The document includes a brief research on the auditing issues related to the managers in the
Enron organisation. ASIC boss Gerg Medcraft claims the wrong working of the auditing
firms can collapse the giant organisations. In the recent newspapers of Australia, the news
about the auditing issues are been reported. The recent words of Greg, former ASIC boss, the
mistake done by the group of global auditors in the operations of their clients they are
working with (Ryan, 2019). This can lead to the falling attempts of the organisational
operations. The issue of Enron Company was not reporting the fraud and corruption done by
the company, the auditors in this case were blamed for poor auditing standards and conflict of
interest to the Enron scandal. Mr Merg also included in the words that the big enterprise more
will be the destruction with the auditors’ wrong report in the market (Wootton, 2019).
The major issue behind this article is the misappropriation auditing done by the auditors of
the books of accounts or the fundamental financials of the company. The auditing in the
company plays a major role in the checking of the financials of the company in accordance to
the stated standards and principles in the organisations. The auditor plays an important role in
taking the decision in relation to the future and potential investors of the company. The
auditors in the company should be responsible with context to the importance in the
organisation (Ferguson & Yeates, 2019). Importance of the auditors is precisely to be with
the operational management in Enron Company. The benefits derived from the presence of
the auditors are: the recording and analysing of accurate financial statements. The books so
obtained will be in the compliance to the accounting standards. The relevance of the books
depends on the compliance of accounting principles and standards (Brenner, 2019). An
auditor also ensures the efficient working of internal management of Enron Company. The
auditors also examine the critical areas of the internal management which needs improvement
and checks the performance with the new technology and accounting systems.
The challenges faced by the auditing firm the Enron scandal is that the firm needs to fulfil the
requirements in the within the relevance to the changes done in the real time in the
Accounting Standards (AS) and accounting principles in the country in which Enron is
operating. The auditing firm needs to maintain the improved AS while working for any
organisation. This was observed while working in the Enron Company the auditors did not
comply with the policies and hence reported wrong. The next issue is the over burden of the
tasks and challenging and tight deadlines of the same number of allocated task to the auditors.