The Role Of Auditing Standards On The Agency Theory And Review Common Benefits

1291 Words6 Pages
In the beginning, this report briefly describes the nature of auditing issues including the independence of auditor – Arthur Anderson and its compliance of auditing standards about the collapse of HIH insurance from five articles. Secondly, it discusses and highlights some ethical issues, stakeholders including the relationships between HIH directors and its auditing team, and outlines their financial and non-financial problems around HIH’s stakeholders. This report also analyze HIH’s auditing issues applying on the agency theory and review common benefits with the role of an auditing firm – Arthur Anderson in HIH’S collapse.

HIH was the second largest insurance company in Australia, which established in early 1968 and then
…show more content…
Ethical issues
Rodney Adler inherited FAI insurance from his father Larry Adler in 1988, and it was taken over by HIH in September 1998 in $300 million. Then Rodney Adler acted as a director of HIH. During the period of 1998 to 2000, HIH lost $405 million by take over the FAI insurance, which is more than the purchase price. FAI insurance was been found concealed real internal financial condition in order to be purchased by HIH. This incident had been led to accelerate the collapse of HIH. Rodney Adler handed in his resignation one month before 15 March 2001, which was the date the company decided to go into receivership to get clear of his responsibility. This implies that the board of directors and management can ensure any conflicts of interest can be monitored and resolved when company chairman resigned.

Finanical Consequences on stakeholders
‘During the period of 1999 to 2000, HIH paid $1.6 million consultancy fees and $1.7 million in audit fees to Arthur Anderson. This represents Arthur Anderson provided such service about consultancy ethical whether they owe duty of care being the best interest of shareholders.’ (Mirshekary, Yaftian

More about The Role Of Auditing Standards On The Agency Theory And Review Common Benefits

Get Access