MBS680: Auditing Individual Assignment Help
Question
MBS680: In this Auditing assignment for Murdoch University, students are required to research extensively about an immensely significant corporate collapse in contemporary history. The students are supposed to elaborately study the collapse of the Enron corporation, which is a US-based energy, commodities, and services organization. Based on this research, the students are supposed to answer three questions that revolve around the accounting-related mistakes that might have led to this collapse, the compromised independence, and ethical requirements during the final audit year, as well as the accounting and auditing consequences due to the collapse.
Solution
The solution written by our experts incorporates detailed answers to the three questions mentioned in the task file. You can read a snippet of the answers below:
Question 1
The first question urges the student to research and think about the accounting-related events that are responsible for the collapse of the Enron organization. We have provided half of the solution written by our experts here.
One of the biggest accounting occurrences that contributed to Enron’s demise was the usage of special purpose entities (SPEs). Enron set up these entities to get debt off its balance sheet, giving the impression that the company was making more money than it was. Enron was able to hide losses from failed investments by using SPEs, leading to distorted financial statement. The tampering with earnings reports was another factor that played a role.
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Question 2
In the second question, the students were supposed to identify and explain the independence requirements and ethical principles that were not followed appropriately in the final audit year. The answers written by our experts are supported by examples from relevant sources and literature.
In addition to revealing flaws in Enron’s accounting procedures, the company’s demise raised ethical concerns regarding auditors. The objective of professional accounting bodies’ independence requirements and ethical framework is to guarantee that auditors conduct audits with objectivity and integrity. One of the vital parts of the freedom prerequisites is the disallowance of inspectors from giving non-review administrations to review clients. In the case of Enron, Arthur Andersen provided the business with both audit and non-audit services, such as consulting. The audit’s independence was put at risk as a result of this conflict of interest. In order to keep Enron’s business, Andersen was more likely to overlook accounting errors. For instance, Andersen gave his approval to the use of special purpose entities (SPEs) created by Enron.
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Question 3
The last question delves into the consequences concerning accounting and auditing following the collapse of the Enron organisation.
In the United States, the Enron collapse in 2001 lead to a massive revision of accounting and auditing regulations. The scandal brought to light the necessity of tighter regulatory oversight of public companies and their auditors to prevent future incidents like this. The Enron collapse led to a number of accounting and auditing outcomes, such as the adoption of the Sarbanes-Oxley Act (SOX) and enhanced regulatory scrutiny of auditors. The passage of the SOX Act was one of the most significant accounting outcomes of the Enron bankruptcy. A number of new laws were enacted as a result of the act, which was passed in 2002, with the intention of raising corporate accountability and transparency. Among its arrangements, SOX laid out the Public Organization Bookkeeping Oversight Board (PCAOB), which regulates the examining of public organizations, and made new guidelines for examiner freedom and corporate administration. Companies were also required to disclose off-balance sheet transactions and implement internal controls and procedures to prevent financial fraud under SOX. Off-balance sheet transactions, such as special purpose entities (SPEs), which Enron used to manipulate its financial statements, were also required to be disclosed by businesses under SOX4. Companies were not required to disclose these kinds of transactions prior to SOX, which could conceal substantial liabilities and skew a business’s financial position.
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