Title
Enron and Andersen - What Went Wrong and Why Similar Audit Failures Could Happen Again
Files
Description
Book Chapter
Enron and Anderson - What Went Wrong and Why Similar Audit Failures Could Happen Again, in Enron: Corporate Fiascos and Their Implications, posits that unconscious bias, compounded by organizational flaws and a culture at Andersen that emphasized marketing non-audit services to audit clients in an effort to boost profits; significant conflicts of interest and self-interest; and greed all help explain the audit failure at Enron. Although the Sarbanes-Oxley Act of 2002 attempted to strengthen auditor independence, under the guise of increasing auditor independence, a public company's management can still recommend that the audit committee hire another accounting firm to provide tax or other non-prohibited consulting services if the auditor does not approve, or at least acquiesce in, certain accounting treatments or disclosures preferred by management. In addition, unconscious bias suggests the need to require mandatory rotation of audit firms after fixed terms for preset fees to eliminate the threat that the client can fire or otherwise punish the auditor for failing to approve questionable accounting practices.
ISBN
9781587785788
Publication Date
2004
Publisher
Foundation Press
Keywords
Enron, Andersen, audit failure, expectation gap, auditor independence, non-audit services, tax services, unconscious bias, Sarbanes-Oxley, audit committee
Disciplines
Accounting Law | Law | Tax Law
Recommended Citation
Barrett, Matthew J., "Enron and Andersen - What Went Wrong and Why Similar Audit Failures Could Happen Again" (2004). Books. 278.
https://scholarship.law.nd.edu/law_books/278
Comments
Citation: Matthew Barrett, Enron and Andersen - What Went Wrong and Why Similar Audit Failures Could Happen Again, in Enron: Corporate Fiascos and Their Implications 155-168 (Nancy B. Rapoport & Bala G. Dharan, eds., 2004).