Enron: Independence Essay

1166 Words Oct 10th, 2015 5 Pages
Enron: Independence

Investors, creditors and other users look at financial report in order to understand and analysis of companies’ financial performance. And auditors are the people who will perform and exanimate all the company financial records in order to make sure its accurate and reliable. Therefore, the auditors must maintain independence in audit process because they will have to express their opinions of fairness about the company’s financial position. According to GAAP, independence section states that all the auditor must maintain independence in mental attitude in all matters relating to audit. It’s also defined as independence in fact and appearance. In addition, independence standards for public companies are currently a
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Arthur Andersen did not follow GAAP when it considered Enron’s dealing with related partnerships as well as violating the independence in audit process. The companies said that “we’re trying to kinda cross the lines and trying to, you know, more of just business person here at Enron. These unethical actions and thoughts damaged strongly to Arthur Andersen’s brand and its creditability.

According to PCAOB Ethics and Independence, Rule 3520 states the fundamental ethical obligation of independence that a registered public accounting firm and its associated persons must be independent of the firm’s audit client throughout the audit and professional engagement period as well as maintaining independence from their audit client ”both in fact and appearance”. Independent auditors have a crucial public trust and very significant to the audit professions because auditors are expected to have high ethical standards and give fairness opinions on financial reports. In addition, independence of mind permits CPA to perform an attest services without being affected by influences that might compromise professional judgment, thus let the individual to act with integrity and exercises objectivity and professional skepticism. Moreover, independence in appearance requires the avoidance of circumstances that might cause a reasonable to informed party third party, aware if all relevant information, to reasonably conclude that the integrity,

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