This action might not be possible to undo. Are you sure you want to continue?
Principles Provide the foundation for Rules of Conduct by establishing ideal attitudes and behaviors Rules Define minimum standards .
Principles Responsibility Public Interest Integrity Objectivity & Independence Due Care Scope & Nature of Services .
Integrity. and Objectivity (section 100) General Standards and Accounting Principles (section 200) Responsibilities to Clients (section 300) Responsibilities to colleagues (section 400 – no rules currently exist for this section) Other Responsibilities and Practices (section 500) .Rules (Categories) Independence.
to oversee both the internal and external audit work completed for the organization . Guarantee that management properly used their time. and the entity’s resources in the best interest of the stockholders Consult management Monitor and oversee management to make sure that the company is following the mission statement Establish an Audit Committee. consisting of members of the Board. talents.
they began trading natural gas commodities Then assumed the role of intermediary by entering into contracts with buyers and sellers of energy and profiting on the price difference.The loss of consumer confidence and trust was Enron’s biggest business risk. that posted gas and power industry pricing data using cutting-edge technology and also functioned as a webbased commodity trading site. Introduced a trading website called EnronOnline. Customer base and partners were influenced by the trust that was established from previous transactions with Enron . As of 1989.
. the Board of Directors should have required management to provide detailed reporting for those entities Required both an internal and external audit of the SPEs and their underlying transactions The Audit Committee should have closely evaluated the work done by Author Andersen and the external audot group.The Board should have evaluated whether the need for Special Purpose Entities (SPEs) was necessary before approving the request Assuming SPE’s were needed.
and were reported as revenues on the Enron financial statements Enron would claim that the transactions with the SPEs were at arms length and entirely met accounting standards SPEs were off-balance sheet entities so the countless debt that was mounted was put into these entities and was not consolidated into Enron’s financials. often with direct or indirect guarantees from Enron.SPEs were used to take out loans. Enron also used these SPEs to conceal investments with companies that began showing losses. .
the public. are likely to lose sight of their “true” client. for whom they provide consulting services. Performing non-audit tasks could lead to the auditor providing support for the company and ultimately providing poor judgment that would influence the audit of the company. Auditors who provide extensive consulting services as well as audit work. when making decisions on the audit engagement. Auditors in this position become influenced by the managers. External auditors that completes internal audit services for the same company will eventually be forced to audit their own work in a financial audit. .
Rule-Based Accounting List of detailed rules Created by lawmakers and committees Detailed requirements Principles-Based Accounting Standard key objectives Cover all accounting situations Bright-Light Accounting Standards recognized by courts in legal instances Standards recognized by legislatures in statutory provisions .
The trust and integrity that was built with their customer base was lost and its something required in order to have a business. Trust and integrity is lost with the public and investors Trust and integrity is lost with their financial institutions where numerous loans were outstanding Enron failed to be honest in their practices and failed to disclose information provided in their financial statements due to accounting of the SPEs .
Lost Public trust for not effectively completing a the tasks that were assigned. Lost Public confidence that is needed in order for managers and partners to effectively complete independent analysis and make decisions based upon that information Lost the Public confidence that is needed to serve and inform the public of misdeeds and improper accounting and procedures .
Keep independence from clients in order to prevent emotions from influencing the decisions. and/or associations Make ethical decisions based on the best interest of the individuals or firms you represent (ex: public or stockholders) Follow rules and standards established by governing agencies. Always maintain a questioning mindset when reviewing the work of others . companies. Make no interactions with questionable individuals.
Sarbanes-Oxley Act of 2002 Created the Public Company Accounting Oversight Board (PCAOB) Imposed stricter independence rules Imposed audit of internal controls as part of the annual audit for public companies Increased reporting responsibilities Increased responsibility of corporate officers and directors for their company’s financial statements (specifically the CEO and CFO must personally certify the fairness of the financial information and company’s compliance in each quarterly and annual report .
Individuals that fail to provide integrity or character.The SEC has the power to suspend for any person the privilege of appearing and practicing before it that person is found guilty of any the following criteria (Rule 1 0 2 e ) : Any person found to not possess the necessary qualifications to represent others. district. including any person whose license to practice has been revoked or suspended by any state. etc. territory. . Individuals who have been involved with unethical or improper professional conduct Individuals who have knowingly violated or aided and abetted any violations if federal securities laws or rules established to those laws.