Wendi Kraus
AC 503
Professor John Kuhn
Unit #1 Case Study

1. The Enron debacle created what one public official reported was a “crisis of confidence” on the part of the public in the accounting profession. List the parties who you believe are most responsible for that crisis.
There are many responsible for the crisis at Enron. The two main are the top executives at Enron and the auditors at Arthur Andersen. The auditors at Arthur Andersen clearly had a conflict of interest. Andersen earned more form other accounting services from Enron than from auditing services performed. This would certainly lead to the notion that Andersen could and probably did alter the financial reports of Enron to their own benefit. The top executives at Enron were also just as responsible as each of them were profiting from the buying and selling of the company’s stock making huge profits. Both the auditors and the top executives were well aware of the special purpose entities to protect the data that should have been entered on the consolidated financial statements of Enron. The auditors and the top executive should have noticed the problem with the special purpose entities and reported them. Both the auditor and the top executives were profiting from the special purpose entities not being reported on the consolidated financial statements.

2. List three types of consulting services that audit firms have provided to their audit clients in recent years. For each item, indicate the specific threats, if any, that the provision of the given service can pose for an audit firm’s independence.
One service an auditing firm has offered to its clients is bookkeeping. This can certainly be a threat because the auditor will not look as closely at work he or she performed. The audit can potentially have bias. A second service an auditing firm may offer its clients is tax