June 21, 2014
The main function of the audit profession is to provide true and fair views of the financial statements. There are many people who depend on the information provided by the auditors including government officials, investors and management for the company. If the company's information is misstated, overstated, or fraudulent in nature, it does not just affect the company but any third-party or government agency which uses it. Due to the activities of the Enron scandal, the audit profession was deemed questionable at best. Activities such as insider-trading, falsified financial statements and money laundering all led to the bankruptcy of Enron and the skepticism of anyone who worked as an auditing professional (Knapp, 2011).
Responsible Parties to the Enron Scandal The demise of the Enron Corporation due to scandal took place in 2001 in Houston, Texas. Enron was an American company which dealt with energy. The Enron scandal has come to be known as the biggest audit failure in history. Employees, investors, investment bankers, accountants and executives were defrauded and left for broke. This was in part due to the company's non-transparent financial statements and in part due to unethical practices. The company's major objectives were to overstate actual income and cash flows, to over-inflate the assets and to omit liabilities completely from the books, basically to make the company seem to have the perfect operation. In doing do, the management was able to transfer funding to their personal accounts, lining their own pockets with investor money (Silverstein, 2013). There were mainly four parties involved and responsible for this fiasco. Kenneth Lay who was the chairman of the Houston Natural Gas. He had a vision of making Enron the world's greatest company. Lay was guilty of money laundering, securities fraud, conspiracy and making false statements to the auditors. Lay was also guilty of approving the actions of Skilling and Fastow without inquiring, in any way, about the details. Finally Lay was also guilty of announcing to investors that they should buy stock, predicting the level would reach and unprecedented $130 a share when he knew the company was in financial crisis (Knapp, 2011). The next responsible party was Jeffrey Skilling. Skilling was hired by Kenneth Lay as his top subordinate. Jeffrey Skilling's main responsibility was to act at intermediary between energy products and those who use the products. He was asked to develop and implement plans to transform Enron to an energy trading company (Knapp, 2011). The third person whom was help responsible for the Enron scandal, was Enron's very own Chief Financial Officer, Andrew Fastow. Fastow was considered to be the main person responsible for the Enron scandal. He was considered to be the mastermind behind the fraud, insider trading, money laundering and conspiracy (Knapp, 2011). Arthur Anderson was the final person responsible for the Enron scandal. Anderson was in charge of destroying damning documents, an deleting incriminating emails. He was the "go-to" person for management and the main person involved in "cooking the books". Although there were many other people involved in this scandal, these four ultimately were the key point persons in the demise of Enron (Knapp, 2011).
Consulting Services Provided by Auditing Firms Audit it the process by which financial information is examined for the purpose of providing a comprehensive opinion of the financial health, practices and procedures of a company. Auditors will issue an opinion basically stating that the company is not operating in an illegal manner and is free of fraudulent activities and they are portraying an accurate picture of the overall financial health.