parties’ interests, primarily because auditors have become too closely linked to their clients’ management。

Andersen has had many problems with audit failures and questionable accounting prac- tices before the Enron debacle (e。g。, Waste Management, Sunbeam, and the Arizona Baptist Foundation)。 While maintaining its innocence, Andersen paid out record settlements for fail- ing to fulfill its professional responsibilities in several audit cases。 Many critics stated that the magnitude of this behavior should have mandated criminal charges against the entire firm。 Yet these sanctions obviously did not change Andersen’s behavior or audit approach relating to fraud detection and risk assessment at Enron。 Andersen may have viewed these penalties as nothing more than fines on the way to even higher profits。 But in response to his decision to indict Enron, Assistant Attorney General Chertoff claimed that Andersen was a repeat offender deserving of the stiffest punishment (McRoberts, 2002d)。

3。Summary and conclusion

The evidence shows that the Enron matter certainly was not an unexpected rare occur- rence。 Moreover, the argument that the capital market needed the type of efficiencies suppos- edly brought on by auditors becoming business partners of their clients through performing increased non-audit services now seems hollow。 Since auditors seek to avoid or manage risk while consultants embrace risk-taking and innovation, the two disciplines rarely work well together (McRoberts, 2002b)。 The continuous movement away from maintaining arm’s length relationships among clients and their public accountants became a self-serving argu- ment for auditors and clients at the expense of the public good。 Byrnes et al。 (2002) argues that self-regulation needs to be strengthened, with more clear direction on “who’s in charge。” A senior partner at one of Andersen’s competitors claimed that unless the profession makes some major changes, future Enron-type debacles seem almost inevitable (Wilson, 2002)。论文网

As O’Malley (2002) suggested, Enron probably has heightened awareness and motivated analysts and investors to search more diligently for accounting distortions。 But his contention that the reporting system has done remarkably well given the demanding conditions of the modern business world seems quite generous。 If Enron truly were a unique and rare occurrence like a perfect storm, this line of reasoning would have merit。 However, such other major audit failures as World Com and Adelphia highlight the need for an improved financial reporting system。 Our analysis and review of the literature shows that accountants should more carefully perform their audits as the best means to prevent future Enrons。

One possible solution would be to ensure punishment for accounting firms, auditors, corporations and top corporate executives who partake in such fraudulent activities。 The recently enacted Sarbanes-Oxley Act (Accounting Reform Bill) creates clearer guidelines and restrictions for auditing firms and their clients regarding auditing and consulting ser- vices; extends whistleblower protection; and makes destroying audit documents a felony (AICPA Website, 2002)。 This Bill should help make audits more accurate and reliable。

In the meantime, we encourage regulators and the profession to make better use of existing works on fraudulent financial reporting。 Andersen didn’t need new guidelines; it needed to follow the old ones and to read the interpretive literature。 Basically, the profession needs to adopt a “back to basics” approach to auditing。

References

American Institute of Certified Public Accountants。 Omnibus statement on audit standards, Statement on Auditing Standards No。 45。 New York, NY: AICPA; 1983a。

American Institute of Certified Public Accountants。 Audit risk and materiality in conducting an audit, Statement on Auditing Standards No。 47。 New York, NY: AICPA; 1983b。