Enron Scandal And The Corporate Financial Frauds

1374 Words Jan 2nd, 2016 6 Pages
One of the biggest corporate financial frauds in history was Enron scandal, where the relationship between the company governance and their auditors - Arthur Andersen was one of the factors that helped the company hide its frauds, which eventually led Enron’s bankruptcy. The accounting firm was accused of not acting independently and misstating Enron 's accounts such as keeping huge debts off balance sheets. Some believe that the auditors had gone along with Enron’s questionable accounting practices in order to maintain their work. As a result, the shareholders lost $74 billion further (further depressing the stock market), thousands of employees and investors lost their retirement accounts, and many employees lost their jobs. In addition, Arthur Anderson reduced the number of large global audit firms from five to four. This and other cases of fraud call for improvements in the system to better protect investors. Indeed, all we can do to prevent corporations and banks from going bankruptcy and causing national economic chaos is to learn from past lessons and consider much fiercer statutory regulations of the auditing profession.
One of the ways to do this is through enhancing audit report’s quality. Indeed, audits can improve the quality of reporting by banks and provide discipline to company managers and executives in their presentation of financial information. One of the ways to improve audit quality is by strengthening auditors’ independence. As we know, the main…
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