Crisis of Enron and Auditors Responsiblilites - 2149 Words

Viktoria Martirosyan Case 1.1 Qt.1 Several parties were responsible for Enron crisis, including independent auditor, key executive officers, internal auditors, SEC and FASB. The hypocrisy, dishonorable actions and unethical behavior of Kenney Lay, Jeffrey Skilling, Andrew Fastow led to bankruptcy. This and many other problems, such as loss in transactions involving the swaps stocks, SPE related issues and est., finally contributed to crisis. As Enron executives, all of their concerns should have been focused on Enron’s profits, but seems that many of them only cared about their wealth. When financial problem surfaced, they did not attempt to fix it, but made efforts to maintain their own benefits and ignored the whole company’s and†¦show more content†¦Enron made only nominal financial statement disclosures for its SPE transactions and those disclosures were typically presented in confusing if not cryptic, language. 2. SAS 55- Internal Controls. Judging from the case, it can be clearly seen that internal control was not working properly. 3. SAS 45 Related parties - Special Purpose entities were a mechanism to raise needed financing for various purposes without being required to report the debt in their balance sheets. Enron used gaping loophole in accounting practice to create hundreds of SPEs and it did not limit its SPEs to financing activities. Enron used SPEs for the purpose of downloading underperforming assets from its financial statements to the financial statements of related by unconsolidated entities. SPE would finance the purchase of those assets by loans collateralized by Enron’s common stock. In some cased, undisclosed side agreement made by Enron with an SPE’s nominal owner insulated those individuals from any losses on their investments and, in fact, guaranteed them a windfall profit. Even more troubling, Enron often sold assets at grossly inflated prices to their SPEs allowing the company to manufacture large â€Å"paper† gain on t hose transactions. Qt.4 Audit documentation as per SAS 103, is a record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached. It supports the fact that the audit was done in accordance with auditing