Q.1
Crisis of confidence happens after the Enron scandal occurred. I think several parties should responsible for this crisis, that include independent auditor, client¡¦s key executive officers, client¡¦s internal auditors, SEC, FASB, bank and financial analysts.
The most important statutory duty of the independent auditor is to ensure the financial reports are intended to give a ¡§true and fair view¡¨. If the financial statement contains fraud and irregularities, independent auditor should discover and report it to the proper authority. For the Enron case, Anderson breaches the duty to warn, as they know there is fraud and major error in the financial statements, which is the overstatement of the profits. As if they have warn the clients, even Enron had done nothing, Anderson should report to the proper authority, however, they did not report this. Even worse, Anderson issues an unqualified report. Besides, Anderson was unknown one- half of the SPE which showed Anderson was lack of competence.
Auditor independence helps to ensure quality audits and contributes to financial statement users¡¦ reliance on the financial reporting process, however, if the investors find out that the financial statement contain major problems, therefore, the creditability of independence auditor would be challenged. Thus, investors tend to unbelieve professionalism.
For the key executives of the client, they should familiar with the whole company situation. If there are any material problems they should point out immediately. The intention of the Enron¡¦s executives which make the financial statement totally failed. This failure triggers the disappointment of the public of professionalism. Moreover, if the client have no intention to deceive the public, in ...