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When Auditing Succumbs to Capitalism – Enron

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Submitted By kgokul1991
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When auditing succumbs to capitalism – Enron
We all know why Enron failed. Everyone knows the story and everyone is pointing the finger at someone else. Let us not waste our time trying to pass the buck, but look at the failures of auditors in this saga for they were the ones entrusted to act as steadfast agents of independence to protect the interests of the common man from the capitalist vices of the modern era. Where did it go wrong?
Capitalism, for all its glory and wonder is nevertheless flawed. It is its own worst enemy. The purpose of auditing is to make sure capitalism does not get ahead of itself and collapse taking us down with it. Of all the theories to support the existence and importance of auditing, independence has by far been the most if not the only solid argument. Its duty as an autonomous entity to reduce the information asymmetry so that the engines of our financial markets run efficiently and free from the flaws of the capitalist system. The role it plays as a fail-safe to prevent the house form crumbling down is as good a reason as it gets. But in this case it would seem as though, despite its best efforts auditing, ironically has itself been pulled into the very house it was meant to watch over.
This shouldn’t come as a surprise because let us not forget auditors are also subject to the philosophies of capitalism despite being its nanny. This failure of the checks and balances meant to keep capitalism on a leash lead to synergistic corruption which saw Arthur Anderson take away $1 million a week in billable revenue in 2001. At a time when they should have said No they took their share and walked away without a second thought. The auditors who were supposed to prevent this from happening became part the reason it happened.
If there if one thing that Enron has taught us, it is to ask why?

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