Evaluating is the strategy of investigating & examining any part of a business, whether money related or non-fiscal. Inspectors are completely prepared to spot regions of required change, potential dangers and occurrences of deceptive direct in their general vicinity of adroitness. Reviews can disturb the ordinary stream of business in an organization, yet the capability to spot and location potential shortcomings generally exceed any transitory misfortunes of gainfulness. Around the extent of issues reviews can audit are human assets approaches, operational strategies, and quality or security arrangements and, obviously, bookkeeping reviews.
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In our research, we will recognize the role and importance of internal, external auditor and internal control system in the business to improve the organization efficiency, through analyzing case about Enron and its auditor Arthur Anderson, including purpose of failure for both the business and the auditor, and how the internal auditor, control system and the external auditor (Arthur Anderson) contribute together and led to breakdown for both businesses.
Enron, which is an American company for energy located in Houston, Texas, and became at that time the largest bankruptcy reformation in America. Also the ending of its auditor Arthur Anderson who served as an auditor for 89 years, .It was the largest audit failure.
Enron was established in 1985, through merger between Houston Natural Gas and Inter north. Its executives who used to escape some accounting information and ambiguity in accounting. And also special purpose entities and use inadequate and weak financial statements.
Through these illegal ways, the company can hide billions of dollars in debt through unsuccessful and failure projects and contracts. The Chief Financial Officer in cooperation with executives and staff gave false and confusing information to audit committee and directors in Enron, regarding very important accounting procedures with a high risk, in addition to forcing Arthur Anderson to disregard and overlook the issues. The employees in Anderson had illegally damaged thousands of records and documents related to its client Enron. At Enron, the executives were accused for charges and punished in the prison. In US District court, Arthur Anderson was found responsible for an offence and also had lost its customers and closed.
In the lawsuit, the shareholders and employees received limited earnings and return, in spite of mislaying billions through stock prices and pensions. Anderson gave up CPA license and lost its accounting practice and its integrity and credibility, and became out of business in US. Through this case, we can notice that there was cooperation between Enron and Arthur Anderson, the auditor, which led to that big problem.
Executives at Arthur Andersen and Enron did not set out to have a positive impact on the accounting industry. They set out to make as much money for themselves as quickly as possible. They were willing to do whatever it took to make that money. These thoughtless acts and greed led both companies to an eventual downfall in bankruptcy. However, the accounting industry reacted by introducing changes that would, in the long run, improve itself and the economy in which it exists. The changes that are a response to the Andersen/Enron debacle may be coming to an end. We are probably seeing the last laws, pronouncements, and statements that are a direct result of these actions. Still, the changes that have occurred leave the accounting industry and the economy stronger. Will the industry ever be perfect? ...