Internal Checks And Balance System Essay

The doctrine of separation of powers developed over many centuries. This practice doctrine can be traced to the British Parliament's gradual assertion of power and resistance to royal decrees during the 14th century. Political theorist, John Locke wrote about the concept of separation of powers in his Second Treatise of Government (1690). In the United States, the separation of powers is a fundamental constitutional principle. The framers of this Constitution saw the need to divide power within the government to prevent a single group from ruthlessly taking over the country. Articles I through III of the Constitution of the United States place each of the basic powers of government in a separate branch. This

Did you know the framers of the constitution belt a checks and balance system into the government? There are three branches the executive, legislative and judicial the checks and balance were put in place to ensure that no one branch would be more powerful than the others. These checks and balances include the presidential Veto, the ability of congress to Impeachment and, judicial review.

When the framers of our revered Constitution came together to produce our governing system, they wanted to avoid the precedent of an all powerful entity that could control its citizens. They broke governments role into three important phases, which were the power to make laws, the power to interpret laws, and the ability to enforce them. To further decentralize these authority holding organizations, they created a system that allowed each of the three sections to have a say in each of the others ability to exercise said authority. This organization of overlapping power is referred to as a checks and balances system and was intended to create three equal powers to govern the United States. Over the years since its

The system of checks and balances is a procedure in which systems allows each branch of government to limit the powers of the other two branches. These checks allow each branch to block the actions of another branch. When Congress has the power to pass laws, the president can check this power by vetoing a bill before it becomes an actual law. Congress also has the same power and can check the president’s power by overriding the veto if two-thirds of the majority in Congress vote in each house. The Judicial Branch can also check these actions of the other two branches. The Supreme Court can declare that a law, treaty, or an executive action is unconstitutional. Basically, the system of Checks and Balances is to balance out each branch and limiting each branch’s power. (Page 162 9.2)

Without a question the BOD should have placed a high degree of reliance on Andersen, which at the time was one of the most prestigious worldwide accounting firms. The auditors should have known the kind of accounting taking place in Enron. In my opinion, Andersen knew, at least to some extent, the company’s financial condition. However, Enron was already too deep under water that blowing the whistle so late would have created problems for Andersen as well. According to the case, on 02/05/01, Andersen held internal meeting during which it addressed the company’s accounting from and oversight of the LJM partnership. Andersen never discussed these concerns with the Audit and Compliance Committee. Although the BOD has its faults, it should have been able to rely on Andersen’s work.

Arthur Andersen (AA) contributed to the Enron disaster when it has failed to the management by failing to have Enron establish and enforce its own internal control. There has been flaws to AA‘s internal control. There has been assumption that AA partners were too motivated by revenue recognition thus, overlooking several criteria when providing their services to Enron. Additionally, AA also recognised the retention of audit clients as vital and a loss of any clients would be disadvantaged to an auditor’s career. In AA internal control, the person who is able to make most of the decisions is the person who is most concerned about the revenue or losses of the client’s company.

Creating checks and balances in the United States (US) Government was a goal achieved by dividing power into three governmental branches; legislative branch (Congress), executive branch (Presidency), and a judiciary branch. The power flows from the Judicial Branch to both Congress and Presidency and back again from both branches. The power also flows back and forth between Congress and the Presidency. According to Founder James Madison, they had to “enable the government to control the governed, and the next place to oblige it to control itself” (5). Although the Constitution gives the national government authority over foreign affairs, there was an essential tug of war created for the ultimate control between the legislative branch and

The separation of powers and checks and balances is a system that was created in America by the founding fathers in the constitution of the United States. The separation of power plays an important role of keeping the three branches which are legislative, executive, and judicial in the government systems equal to one another and that neither branches becomes too powerful. Each branch has its very own power and duties to serve to the people and government. All three branches play a significant role in checks and balances and separation of powers, in our government and rely on each other to make sure that all of the power is equally distributed.

The architectural design of a firm varies greatly. In 1950, the business environment of Arthur Andersen included using the computer effectively for automated bookkeeping. Structure and regulation of the markets, helped Arthur Andersen to develop into a well-respected and reputable auditing company. The federal law in the 1930s requiring companies to turn over their financial statements yearly to an independent auditor not only strengthened Arthur Andersen, but also helped with their impeccable reputation. Arthur Andersen’s strategy included quality audits with a well-managed staff and profits. Promotions and rewards were plentiful when auditors made sound auditing decisions. In the 1990s, Arthur Andersen’s organizational architecture and strategy focused on generating new business, cost cutting, and performance evaluations along with decision rights over its business (Brickley, Smith, & Zimmerman, 2009).

In October 2001, Enron Corporation which was one of the world major energy, commodities and service companies with claimed revenues of nearly 111 billion dollars during 2000 collapsed under the weight of massive fraud in that it has become largest bankruptcy recognition in the US economy. Enron’s earning report was extremely skewed that losses were not represented in their entirety, prompting more and more wishing to participate in what seemed like a profitable company. After collapse of Enron, Auditor independence has become a social issue that weather auditor has to be independent or not. In addition, while auditing must consider matters objectively with dispassion, there were still doubts whether it implemented well. Further, there has been much speculation about the need for the mandatory rotation of auditors or audit firm rotation to warn false accounting between audit firm and client. By examining Enron case, this essay will discuss about advantages and drawbacks of the mandatory rotation of

Assigned auditors were more than aware of the accounting misrepresentation of financial statements, overstating net income. Still instead of walking away from the client and resign, Andersen in pursuing short-term goals stayed with the company and moreover played by the Giant’s rules. More and more accounting firms at that time started to provide consulting services along with auditing to the same companies which always indicates a conflict of interests. Auditors are the guardians and rules players where consultants are giving advices and showing how to avoid some accounting oversights. Andersen also in order to make good profits stepped on the side of combining two contradicting to each other services. Waste Management had lots of former Arthur Andersen employees which also led to close ties between two companies. That situation undoubtedly led to inability to turn down fraudulent accounting practices Waste Management was exercising at that time for a long period of time.

Disregarded Enron’s accounting misbehave and Misuse. CFOs and controllers hired by Enron company were former Arthur Andersen LLP executives; shredded all Enron’s documents, and Arthur Andersen LLP attorney altered documents related to its audit work for Enron. Arthur Andersen LLP has been handed the maximum penalty allowed under US law for its role in the collapse of Enron. Arthur Andersen LLP CPA License has

Enron and Arthur Anderson were both giants in their own industry. Enron, a Texas based company in the energy trading business, was expanding rapidly in both domestic and global markets. Arthur Anderson, LLC. (Anderson), based out of Chicago, was well established as one of the big five accounting firms. But the means by which they achieved this status became questionable and eventually contributed to their demise. Enron used what if often referred to as “creative” accounting methods, this resulted in them posting record breaking earnings. Anderson, who earned substantial audit and consultation fees from Enron, failed to comply with the auditing standards required in their line of work. Investigations and reports have resulted in finger

To make matters worse, when Andersen found problems in the financial statements, they didn’t make corrections due to a conflict of interest. The concern was that if Andersen brought these problems to light, Enron would walk away and cost Andersen millions of dollars in the long run. Andersen contemplated dropping Enron as a client, but did not follow through with it. Because the audit and consulting was done at the same firm, it clouded Andersen’s judgment. Andersen employees in Houston began shredding documents and therefore brought obstruction of justice charges that destroyed the firm.

Arthur Andersen supplied external auditing service to Enron since 1980s, internal auditing since 1990s. The long-term cooperation between Arthur Andersen and Enron blurred the lines between external auditor and the company under auditing. Many accountants of Enron were ex-employees of Arthur Andersen. The close relation between the Arthur Andersen and Enron led to the