The lessons for auditors and regulators from Enron fraud Essay

The lessons for auditors and regulators from Enron fraud - Essay Example This paper concerns the auditing as an investigative process performed to verify the reliability and accuracy of a company’s state of affairs for the last fiscal period. A comprehensive and authentic audit report adds to shareholder values and assists the company’s stakeholders to analyse how the management has responded to their financial interests. In addition, business decisions of third party stakeholders such as banks, other lending institutions, and investors are centred on the company’s annual audit report. It seems that even a well structured audit programme may fail to provide desired outcomes unless the whole audit team pays special attention to each and every phase of the audit process. The past decade witnessed a series of corporate scandals including Lernout & Hauspie, Arthur Anderson, Enron, WorldCom, Parmalat, Peregrine Systems, Rite Aid, and Homestore.com. Subsequent investigations have proven that majority of those failures were attributable to a ccounting fraud. However, these incidents greatly increased the significance of audit work and firms nowadays allot more money for developing internal control systems. Many of the economists argue that weaker corporate governance structure also greatly contributed to those corporate failures. As a result, organisations are vehemently trying to improve their corporate governance framework. Evidently, audit firms have made strategic amendments to their processes and procedures to detect frauds and errors in the account books of the client on time. This paper will analyse the lessons that auditors and regulators must learn from Enron Fraud. Enron Scandal: Overview In 1985, The Huston Natural Gas integrated its natural gas pipeline companies with those of InterNorth under the supervision of Kenneth Lay to form Enron. The Enron became the North America’s largest natural gas dealer by 1992 and the company’s gas contracts trading operations significantly contributed to its ma rket dominance. The firm’s stock rose by 311% during the period 1990-1998 and its market capitalisation went over $60 billion by the end of the year 2000. This unimaginable growth assisted the company to be rated as the most innovative huge company in Fortune’s Most Admired Companies survey. Unlike other corporate giants, the Enron had not published its balance sheet along with statement of earnings and this practice persuaded financial analysts to explore the company’s sources of income. Despite the explanations given by the company officials, Enron’ stocks started to fall in 2001 mainly due to its indecipherable nature of business and vague accounting practices. Following the stock level declines, the company faced a series of challenges including restructuring losses, the US Securities and Exchange Commission (SEC) investigation, liquidity issues, and credit rating downgrade. The Enron scandal was revealed in October 2001 and it gradually led to bankru ptcy. Reports indicated that Enron scandal was the biggest audit failure at that time. Jeffrey Skilling, the former President, CEO, and COO of the Enron Corporation, misled the company’s stakeholders through special purpose entities, accounting loopholes, and unsupported financial reporting practices and therefore they (stakeholders) were unable to identify debts resulted from failed deals and projects. These deceitful practices assisted the company to exaggerate its profit figures and thereby unfairly retain the trust of its shareholders. Andrew Fastow, the Chief Financial Officer, and other executives misled the Enron’s board of directors and also forced Andersen to neglect the issues. As per reports, the Enron shareholders lost nearly $11 billion when the company’s stock price fell from US$90 per share in mid-2000 to less than $1 in late-2001 (World News Inc, 2012). Following this issue, the U.S Securities and Exchange Commission commenced an investigation to bring out the actual reasons behind this

Contemporary Middle East History Essay Example | Topics and Well Written Essays - 6250 words

Contemporary Middle East History - Essay Example While not completely Western but also combined with Islamic ideals, the Ottoman Empire presented different challenges for the Middle East than the British and French Empires. The Ottomans demonstrated a semi-Islamic influence in the region. This means that while initially embracing some Islamic ideals, the Ottomans later rejected others and according to Islamic perceptions in the Middle East, the Ottomans while at first more favorable than the British and French Empires were eventually seen as un-Islamic (Gelvin 2005; Khatar, 2004). While many in the region may blame so-called imperialists - (whether they be Ottomans, British-French or American) - for the conditions in the region, the failure of nationalist successive governments to take control of their own destiny is an inherent problem in the Middle East and until today needs to be adequately addressed and confronted (Huntington, 1996). As Huntington (1996) notes 'Western style democracy' in the Middle East has served to increase anti-Western political forces. The history of how and why this rage against Western style democracy can be seen in the social, political, technological and economic forces that have been imposed upon the Middle East via successive colonial administrations. The Ottoman Empire under the absolute rule of Sultan Seleyman had the responsibility of guaranteeing complete justice or adala among the governed. This idea has both Islamic and Turco-Persian aspects. Borrowing from Hebraic traditions, the idea of distributive justice is modeled after King Solomon in the Old Testament who according to Islamic political theory was a considered a seminal figure in distributive justice. This idea encapsulates the Western notion of justice hence the Western portion of political rule during the Ottoman Empire that regarding fairness and equity. Additionally and importantly, the Islamic portion of justice was that notion it be inclusive for all including the lowest individuals in the power structure. As stated within the Koran Allah admonishes the followers of Islam to act equitably "you who believe! Be upright for Allah, bearers of witness with justice, and let not hatred of a people incite you not to act equitably; act equitably, that is nearer to piety , and he careful of (your duty to) Allah; surely Allah is Aware of what you do" (The Dinner Table, 5.8). In terms of economic and social life the Ottoman Empire attempted to include all members of the Empire no matter how powerless. Although seemingly removed ideologically from the society the Ottoman Sultan followed a set of siyasa laws, which included the severe punishment of government officials if they were believed to have abused their powers. Such abuses included illegally taxing or forcing the labor of peasants, forcibly requiring them to give food to soldiers or forcibly staying in their homes (Khatar, 2004; Gelvin, 2005). The punishment for these crimes usually included the death penalty. In terms of social structure and relations, the Ottoman Empire can be considered one of the first to quantify public opinion and therefore demonstrates how public opinion was considered very important in legitimating the power of the Sultan. If the Sultan did not have favorable public opinion and more negative public opinion cultivated by its adversaries then the Sultan would be sure to fall. In order to cultivate and maintain positive favor among the public in support of the Sultan