Reference no: EM132998250 , Length: word count:100

Write on ethics

2 December 2001, Enron went bankrupt. Many have claimed the auditor's are to blame. In 100 words or less discuss which threat to independence is most likely the reason for the collapse. Give a brief reason for your choice.

Enron's collapse was due to the threat to independence of the auditors. The auditors (Arthur Anderson) were pressurised by Enron to omit items, such as the use of special purpose entities to hide assets off financial statements to understate losses, and to find loopholes in the GAAP to improve the company's outlook, such as including unrealised gains to overstate profit. Also, Enron threatened the auditors by introducing other companies to compete with the accounting work to make it seem as though they were being replaced to follow what Enron wanted. Threat to independence through intimidation was what caused Enron's downfall.