Auditing Issues and Collapse of Enron

This document discusses the auditing issues related to the collapse of Enron and warns about the consequences of wrong auditing practices. It highlights the importance of auditors in ensuring accurate financial statements and efficient internal management. The challenges faced by auditing firms and the benefits of proper auditing procedures are also discussed. Suggestions for improving audit quality and resolving auditing issues in Enron are provided.

Running Head: MANAGEMENT ACCOUNTING 2
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Management Accounting 2

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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.

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There was the hike in the operations with the auditing firms, and they fail to complete and
being insensitive to the task and hence reported wrong.
The benefits of the auditing issue in Enron Company would have been possible if correct
procedure have followed. The achieved outcome can be the more reliable and authenticate
fundamental financial papers of the company. The internal management in the firm can
happily enjoy the smooth and ease applied working of the human resource and operational
issues. The trust and loyalty of the customers and shareholders are also being gained with the
proper implementation of the auditing rules and policies in the Enron Company. The
distribution of risk in the organisation also makes the contribution to the correct and real
presentation of the audit and related terms.
Tools and techniques for the key audit improvements can be done with these options. The
audit firms can conduct the auditing process in an effective way. The reviews obtained from
the auditing should be quality in nature while working in the organisation. The next factor is
remediating the findings by citing the evidences to present a reliable report of auditing
(ASIC, 2018). The auditing firm associated with the finding the drawbacks from their own
findings and reports prepared. In Enron Company the auditing firm which audited their
accounts books should have worked on the basic ethics like honesty, integrity, objectivity,
professional competence with professional behaviour while operating in the company
(cpaaustralia, 2019). Implementation of the business ethics is important to gain more reliable
and authenticate documented reports in the firm from the auditing firms and auditors (ifac,
2019).
These understated strategies can be used as the solution to the problems of auditing is gaining
the support from the management. The proper communication should be done to the
management of Enron Company to gain the relevant and confirmation of the conflicting
points to the auditing form (Kagan & Jakubik, 2015). Clarifications and educating the
personnel to move forward with a stable and authenticate information in the minds and
present an error free report to the Enron Company. The involvement of the company can be
done to ease understanding and to resolve the complex key areas in the processing of the
audits in the concern.
After evaluating the above researched document, the guidance and improvements to the
auditing issues in Enron Company from the auditing firm and auditors is been spot and
resolved. The present scenario conceives the idea of solving the corruption and continuing ill
practices in Enron Company. Removal of these problems is to be solved on urgent basis to
avoid the collapse of the concerned company. The manners and strategies which are being
accessed in the study of this auditing issue should be implemented in Enron Company. The
other available options which can be elected by the company are the boosting morality and
motivation among the active employees in the company. More focus should be given on Job
satisfaction and Job enrichment among the employees.

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Bibliography
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cpaaustralia, 2019. Public Practice Toolkit. [Online]
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ifac, 2019. Ethics. [Online]
Available at: https://www.ifac.org/global-knowledge-gateway/ethics?overview
[Accessed 06 September 2019].
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[Online]
Available at: https://planet-lean.com/six-common-problems-you-encounter-during-lean-
audits/
[Accessed 06 September 2019].
Ryan, P., 2019. Audit firms' conflicts of interest could spark Enron-style corporate collapse,
former ASIC boss warns. [Online]
Available at: https://www.abc.net.au/news/2019-08-06/audit-firm-failures-could-spark-enron-
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[Accessed 06 September 2019].
Wootton, H., 2019. ASX200 face 'Enron risk' with non-audit work. [Online]
Available at: https://www.afr.com/companies/professional-services/asx200-face-enron-risk-
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