Introducing
Your new presentation assistant.
Refine, enhance, and tailor your content, source relevant images, and edit visuals quicker than ever before.
Trending searches
Enron Scandal
SYAMIN AZLIN BINTI AHMAD TOHER (252624)
HAFIZATUL AMIRAH BINTI HILMI (255778)
NOOR FITRAH BINTI CHAZALI (256092)
AU CHYI YIH (261613)
JOSHUA NG SWEE WEI (261774)
Downfall of Enron
Illustrate the reason why Enron fall and way to prevent it.
Illustrate the risk arise that lead to material misstatement in Enron's financial statement.
1) System failure
2) Viruses
3) Fraud
1) Intermediary disadvantage
2) Market affect revenue of Enron
1) Borrow through issue of shares
2) Never record liability
1) Board of Director (BOD) roles:
- Protect shareholder's assets and provide return on investment.
- Make important decisions which may affect shareholder's benefit.
- Held liable by their shareholder and other if they negligence in their duties.
2) Audit committee should improve the corporate governance.
3) In conclude: Should ban the SPEs
*a list of detailed rules that must be followed when preparation of the financial statements
*Increase the verifiability for auditors and regulators and a related reduction in litigation and reduced the opportunities for earnings management through judgments
*Providing a conceptual basis for the accountants to follow instead of a list of detailed rules
*Its general guidelines that define how classes of transactions should be reproduced a general term and how the accounting should mirror economic substance
*Allows the users to evaluate the objective consistency of the overall impact, more likely to provide flexibility and concept or idea to the accountants, and to result in transactions that reflect in their true economic substance.
*Bright-line test, that is a law or standard that is intended to be unambiguous and prevent the subjective interpretation
*Very definite, it attempting to outline every accounting situation in detail and this will create entities and transaction that circumvent the intent of the rules
*Yes,cause some problems with the conflict of interest arise in the company
*the substance over form can used to ensure that financial statement give a complete, relevant and accurate picture of transactions and events
Difficulties might be associated with such a change?
Changing towards more principles-based standard are many accountants still concern about the potential of litigation over their exercise of judgement in the absence of bright-line rules
when a large number of people or individuals withdraw their fund or money out of fear that it will become insolvent in the near future and was a liquidity crisis that generally occurs due to the lack of confidence in the company.
Are the analogy valid for both firm?
*Yes . Why?
*That because Enron’s employees who will lose their jobs and investor’s and creditor will suffer a large financial loss.
*Enron could have avoided bankruptcy. If only the investors did not dump Enron’s shares, the creditors did not refuse to lend more money and the company would not been forced into bankruptcy
*since the clients of Andersen loss confidence in the firm’s credibility and started to drop the firm because they either felt that the firm was involved in fraudulent activities, or that the mere appearance would damage their own reputation if they stay with Andersen.
*By the way, many clients of Andersen fired the firm as an external auditor.
*Enron’s issue can be avoided if not being brought up by the press media and Andersen could have survived his large multinational firm.
Bribery
Build up networking
Conduct task with high ethical, integrity and moral standard
Honest & keep our words to the client
Internal auditor - External Auditor - Consultant
Restore public trust in the auditing profession and in the nation’s financial reporting systems
1) Sarbanes-Oxley Act 2002 – To help protect investors from fraudulent financial reporting
2) Audit oversight board – Promote and develop an effective audit oversight framework
3) Revised by law - Not allowed to translate, reprint or reproduce, photocopying and recording without permission
What should be done?
1. Taken more steps to search for fraud
2. Improve auditing standards
3. Control relationship between auditors and audit form and audit firm
4. Disclose accurately financial statement