For purposes of this question,assume that the excerpts from the Powers Report sh

Question

For purposes of this question,assume that the excerpts from the Powers Report shown in Exhibit 3 provide accurate descriptions of Andersen’s involvement in Enron’s accounting and financial reporting decisions.Given this assumption, do you believe that Andersen’s involvement in those decisions violated any professional auditing standards? If so,list those standards and briefly explain your rationale. (Knapp 21) Knapp, Michael C. Contemporary Auditing, 10th Edition. Cengage Learning, 20140724. VitalBook file. The citation provided is a guideline. Please check each citation for accuracy before use.

Explanation / Answer

Yes, Anderson did violate the professional auditing standards as he influenced the decision making process in financial reporting of Enron. The most prominent violation of accounting and auditing standard was the violation of independence in preparing and presenting general purpose financial statements. The responsibility of the accountants was to bring objectivity and independence in preparing financial reports for the company however, the involvement of Anderson in financial reporting decision making process has grossly violated the basic premise of independence. Apart from that the lack of internal controls within Enron was nothing short of mindboggling for such a huge company. Thus, the independence as well as lack of internal controls within Enron both are violation of professional auditing standards. Anderson also violated the principle of responsibilities underlying an audit by influencing the financial reporting decisions apart from many other principles underlying an audit conducted under Generally Accepted Auditing Standards.    

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