enron
Q2.
a. Every company should be headed by an effective board which is collectively responsible for the long-term success of the company. The board is responsible for providing entrepreneurial leadership of the company within a framework of prudent and effective controls that enables risk to be assessed and managed. The board should set the company’s strategic aims, ensure that the necessary financial and human resources are in place for the company to meet his objectives and review management performance. The board should set the company’s values and standards and ensure that its obligations to shareholders and others are understood and met. But the primary responsibility of the board of directors is to protect the shareholders' assets and ensure they receive a decent return on their investment.
b. The board of directors definitely could have prevented the fall of Enron. First of all, if the board of directors made the right strategies for Enron rather than created hundreds of SPEs to remove assets and debts off balance sheet, the picture of Enron could have made a difference. Secondly, if the audit committee of Enron could point out all those aggressive and risky accounting treatment and propose solutions, then the afterward damages could be eliminate or at least minimized.
c. The BOD of Enron should have known about the risks and apparent lack of independence with those SPEs. They should have listen to some of the accountants in Andersen who questioned the legitimacy of SPEs’ business transactions and do something to avoid this.
Q4.
When the auditor performs internal audit services and external audit services and then provides management consulting services for the same client, self-review threats arise. Because the auditor does work for a client and that work may then be subject to checking during the subsequent audit. Auditors could obviously be reluctant to criticize the work that they have done to the same company previously, and this could
a. Every company should be headed by an effective board which is collectively responsible for the long-term success of the company. The board is responsible for providing entrepreneurial leadership of the company within a framework of prudent and effective controls that enables risk to be assessed and managed. The board should set the company’s strategic aims, ensure that the necessary financial and human resources are in place for the company to meet his objectives and review management performance. The board should set the company’s values and standards and ensure that its obligations to shareholders and others are understood and met. But the primary responsibility of the board of directors is to protect the shareholders' assets and ensure they receive a decent return on their investment.
b. The board of directors definitely could have prevented the fall of Enron. First of all, if the board of directors made the right strategies for Enron rather than created hundreds of SPEs to remove assets and debts off balance sheet, the picture of Enron could have made a difference. Secondly, if the audit committee of Enron could point out all those aggressive and risky accounting treatment and propose solutions, then the afterward damages could be eliminate or at least minimized.
c. The BOD of Enron should have known about the risks and apparent lack of independence with those SPEs. They should have listen to some of the accountants in Andersen who questioned the legitimacy of SPEs’ business transactions and do something to avoid this.
Q4.
When the auditor performs internal audit services and external audit services and then provides management consulting services for the same client, self-review threats arise. Because the auditor does work for a client and that work may then be subject to checking during the subsequent audit. Auditors could obviously be reluctant to criticize the work that they have done to the same company previously, and this could