The Enron Scandal and the Importance of Auditors
The effective working of an organization requires strong corporate objectives. These objectives need to be pursued in a diligent manner to make sure that the business process is conducted in an efficient manner (Ashcraft et al. 2017). The whole task of processing a business requires simultaneous control of various internal processes along with the monitoring of all the accounting systems. The prevention of the fraudulent financial transaction is also a part of the measurement of the business performance for which the system of auditing is needed (Chambers and Odar 2015). Auditing is defined as the act of maintenance of financial records by an organization with the engagement of operational aspects for the authentic maintenance of the financial stability related to the organization (Averhals, VanCaneghem and Willekens 2018). The need for auditing is to ensure that there are no discrepancies in the financial records and to track and solve if any. This is done to ensure that the organization has better credibility in terms of business and financial aspects (Barr-Pulliam, Brown-Liburd and Sanderson 2017). The following assessment is an analysis of the different aspects of the auditing system and the amount of assurance that has been fed by the circumstances hampering the performance of the organization in the future.
Australia and New Zealand banking group is amongst the five largest and well-established companies in the province of Australia. It has a potential place on the global basis which ranks amongst the top 50 banks in the world (ANZ.com 2018). There are major stakeholders in the bank who get affected by the problems as well as profit of the bank. The major stakeholders who are involved in the ASX Company are the government, customers of the bank, suppliers, employees of the bank and the other people involved in the public organizations (Averhals, VanCaneghem and Willekens 2018). The bank which is said to be the third-largest bank in Australia after Westpac bank and the Commonwealth Bank has to deal with the stakeholders for which the stakeholder map has been given as follows.
Figure 1: Stakeholder Map of Australia and New Zealand Bank
(Source: Ashcraft et al. 2017)
According to the analysis of the figure, it can be commented that the company has a strong stakeholder management technique. The maintenance of the stakeholder relationship is done through the abstract ideas of trust, relationship building as well as mutual respect in the longer phase of time (Chambers and Odar 2015). The company strives in the building up of a Sustainability Framework which ensures the company to have prioritized the elements of commercial and retail banking element (Ashcraft et al. 2017). The main aim is to provide better banking service to all the stakeholders so that their needs and rights are not hampered. The stakeholders should demand the authentic financial documents for building up their trust on the organization (Barr-Pulliam, Brown-Liburd and Sanderson 2017). The organization on the other hand should also supply them with the required materials as well as credible financial resources for building up their confidence in the policies of the bank (Averhals, VanCaneghem and Willekens 2018). The reliability of the stakeholders is of utmost importance which can only be done by the application of suitable financial papers which are legal and authentic.
The Auditing System of Australia and New Zealand Banking Group
This engages the stakeholders with the firms which gives profit to the firm in the longer run. The trustworthiness of the stakeholders is needed as it helps them to engage more with the bank. The engagement is done on the basis of structural approach of the firm as well as the need to have financial information which is relevant to the case (Barr-Pulliam, Brown-Liburd and Sanderson 2017). Moreover, the old and existing stakeholders need to know about the new shareholders who are entering the organization as well as involving with the working (Chambers and Odar 2015), This is done to clarify the ownership and the management of the regulatory protocols in a work organization for a better environment and clarity within the shareholders (Ashcraft et al. 2017). Moreover, it has also been investigated that with good auditing system which is credible to the organization, the issues that could have affected the long term working of the organization can be mended. The issues which are assessed in relation to the strategies of the organization as well as coordination of different perspectives can be also eliminated by the use of proper auditing measures (Kend and Basioudis 2018). The investors then find the organization suitable for their investment which rises their credibility score in the market.
The importance of the Annual reports as well as other financial papers are immense as it includes all the prevalent issues that are there in the organization and how much work is to be done by the shareholders for mending the issues (Averhals, VanCaneghem and Willekens 2018). The shareholders get an idea about the place of the company in the market through the analysis of the financial papers and auditing system (Chambers and Odar 2015). The analysis of the renders and effective system of management is also to be done by the process of auditing and assurance (Ashcraft et al. 2017). The importance of the shareholders in an organization can be shown using the Power matrix in which ranking of the different stakeholders are being done namely the CEO, financial officer, the project manager, the developers, the change manager as well as the customers and suppliers (Barr-Pulliam, Brown-Liburd and Sanderson 2017). The shareholders each having their own level of power matrix is shown as follows –
Figure 2: Analysis of the power matrix of shareholders
(Source: Soh and Martinov?Bennie 2018)
In the above figure, it can be seen the different stakeholders in the bank in relation to the power and interest. The different stakeholders have their own level of importance in the organization. There is ample need for the strong stakeholder relationship for creating worth and value of the organization in the market (Barr-Pulliam, Brown-Liburd and Sanderson 2017). Australia and New Zealand Bank also focuses on the building up of strong relationships for the creation of better relation between the bank and the shareholders who are also the stakeholders of the bank (Ashcraft et al. 2017). The need for a transparent exchange of finances is needed for the better working of the organization.
Stakeholder Management Techniques of Australia and New Zealand Banking Group
Whistle blowing has been one of the most important terms in the business as this is the person that exposes all the wrong doings of an organization to the outside world (Barr-Pulliam, Brown-Liburd and Sanderson 2017). The person gives the unethical information for making sure that nobody is being cheated by the organization. There has been a number of laws in regards to whistle blowing like The Whistle Blowing Act (1998) to protect the whistle blowers in the accounting information system (Averhals, VanCaneghem and Willekens 2018). The act made sure that the whistle blowers get all the protection as well as do not be forced to disclose their information in public which can harm them in any manner. The work of the whistle blower is to reveal the misconduct which is being done by a company in relation to fraud and other practices for earning better profit (Gu, Simunic and Stein 2017). The whistle blowers are generally current or previous employees who have all the information. This sometimes arises problems in the organization (Ashcraft et al. 2017). The principle of any organization should be related to ethics and proper wok environment. However, this has been hampered by the people many times. The whistle blowers tries to restore the information with transparency (Martínez-Ferrero andGarcía-Sánchez 2018). There are types of whistle blowing activity among which two are important – reporting the misconduct of the organization as well as reporting people outside the organization for the preachment of laws. The act of whistleblower is mentioned in the APES 110 of the code of business ethics. They take into consideration the various analysis of the documentation of the organization as well as employees and government 9 Barr-Pulliam, Brown-Liburd and Sanderson 2017). They have their own risk in which they involve to drive the actual information by raising voice against the politics and legal aspects of business. They mend the needs of the shareholders for which protection is must for the whistle blowers under the Federal protection.
One of the major scandals which can be mentioned in details in this regard in the Enron Scandal and its increasing profit margin due to unethical means. Enron is an electric company which recorded sky-high growth from the time of 1995-2000 (Pratt and Peters 2017). The shareholders became more interested in the organization for the rapid growth of the firm and their expectancy to earn more profit. However, during the time of 2000 to 2002 it was seen that the stock prices of Enron went down (Averhals, VanCaneghem and Willekens 2018). However, it was a terrible loss to the stakeholders as all the investors re-invested in the company and the stock prices went down marking their loss. However, the company showed in their financial papers that the amount of profit was very high to attract more investors in the company. After analyzing the case, it was found that the company was trying to just maintain the brand image and there was no prominent practice of fraudulency (Soh and Martinov?Bennie 2018). The brand image which lasted for 20 years had to be maintained for which the company showed the revenue figures and not the profit margins for maintaining the investor interest in the company. This made a ripple in the government as it came to the realization that the firm was cheating the shareholders by revealing wrong data and just to maintain their position in the market (Louwers et al. 2015). This led to the support of the unethical business practices for which Enron collapsed along with Arthur Anderson. Enron had a perception that their financial data being hypothetical did not arise any issues in the minds of the people and the perceptive data could have been taken into consideration (Simnett, Carson and Vanstraelen 2016). They therefore tried to maintain their financial perspectives and give accounting figures as per the needs of the company.
The Importance of Annual Reports and Financial Papers
The work of the whistle blowers in this case was of immense importance. The whistle blower in this case is Sheron Watkins who was a student of Enron. He revealed to the world the financial malpractices of the firm in relation to the financial numbers and not revealing the actual information which is there in the company (Simnett, Carson and Vanstraelen 2016). He made it into focus that the company did not bother to give the correct information to the people but made sure to gain enough profit by keeping the figures as per the requirement of the firm (Averhals, VanCaneghem and Willekens 2018). They cheated on the people as this did not benefit the stakeholders in any manner but only made profit for the company in the longer phase of time.
The investors will invest in the company based on the figures and would not get the desired amount of profit in the longer span (Simetinger 2018). The aqua advanced technology and production services will be deployed by the workers with more efficiency and have higher productivity in the near future. The financial figures which will be represented in the data will only benefit the organization not the people involved (Schmidt, Wood and Grabski 2016). The stakeholders will invest based on the non-restricted in the financial statements and will expect profit which will not be in practical. The company in their reports accessed the targets that were not achievable and even manipulated the figures in order to keep the interest of the investors alive. This type of practice is not worthy of the act and therefore needs serious attention to it (Simetinger 2018). The whistle blower opened the fact in front of the whole world which led to the collapse of the organization (Barr-Pulliam, Brown-Liburd and Sanderson 2017). They gave feasible information about the unethical acts of the company which led to the elimination of the unethical acts of the organization which hindered the trust present.
In order to complete the act, the whistle blower should first find out more about the problems and then find valuable information in relation to it. They should have ample information to expose the organization (Eaton et al. 2017). Then they should find out a journalist who can help them in their work and also reveal the truth to the world. They are taking the risk for doing something good which should be recognized by the federal claims and should be kept anonymous by the government to keep them safe and sound (Averhals, VanCaneghem and Willekens 2018). There are laws like Paying payment rights act 1996 which gives the whistle blowers the right to receive protection for the act if they expose something bad. They should be protected so that they do not feel any danger in the work and can carry out their work for the betterment of the people in a great fashion (Schmidt, Wood and Grabski 2016). They should be protected and appreciated so that many people can come up for being a dedicated whistle blower in the future for the greater people.
Whistleblowing in Accounting Information System
The role of the auditor and the quality is audit in this fraud case is also noteworthy. The auditors made sure to incorporate more information which made the expectations of the investors high and not include relevant information about the true figures of the company (Eaton et al. 2017). They did not undergo true exchange of financial information which could have benefited the people. People like were Ken Lay and Jeff Skilling who was the CEO of the company were involved in the case with the fraudulent auditing system (Ashcraft et al. 2017). The senior people of the firm including Arthur Anderson got benefited by the whole process while the common investors suffered as the prices of the shares dropped to a major level (Gist et al. 2015). The sudden suffering made certain people go bankrupt which is obviously not something which can be encouraged in a workplace. The only aim of the organization was to create a goodwill in the mind of the investors without caring for the people. The hypothetical situation was created just to trick the investors into something that is not actual but just to seal the original practices and get away with the fraud ones (Knechel 2016). There were certain people who knew about the frauds and therefore got away with it. However, there were people who never knew and got bankrupt for the selfishness of the company.
It is always to be remembered that the external auditors should not be influenced under any circumstances for making sure that correct accounting has been done. Their privacy should be maintained as well as they should not be given authority to any kind of benefits rather than their deserved (Gist et al. 2015). The Independence Policy statement made sure that the external and internal auditing system aligned with the services that are being audited in a fashion (Eaton et al. 2017). The committees are responsible for the section of the auditing parties and also to ensure that they work in a legal manner (Griffiths 2016). In relation to the Independence Policy, it should be mentioned that there are assurance and approvals from the members before applying the same in the auditing system. Approval from the Audit and Risk committee is also required in the proceedings.
According to the business practice code of ethics, it can be said that APES Code 110 measures the personal accounts for the audit management program (Griffiths 2016). The half-yearly review as well as the full year audit is to be done by the party for ensuring quality and transparency in the system. The auditor and the firm should have a firm relation however the relation should be organize as well as professional (Gist et al. 2015). No personal relations or family terms should be encouraged in the whole act (Eaton et al. 2017). There should be mutual financial interest only with no added terms for the family bonds. This will ensure that all the bonds which are there in the auditing system are only related to the professional terms (Barr-Pulliam, Brown-Liburd and Sanderson 2017). There are no personal relations hampering the authenticity of the audit systems and benefit the mutual financial interest in the firm. Both the auditor as well as the organization will gain benefit to the auditing policy.
Conclusion
At the end of the analysis, it can be concluded that the need for auditing and giving assurance to the stakeholders is of utmost importance to eradicate the malpractices that are there within the organization. The amount of necessity is high to include a transparent as well as authentic financial paper to the people for ensuring social welfare and increased public interest in the bank. This also ensures that the amount of corruption is less which eliminates the unethical as well as illegal accounting and practices. The implementation of the business ethics as well as unbiased decision making is essential for better profit in the longer span of time. The principals which are involved in the external auditing system should not be affected by the different forms of conflicts as well as the policies of the organization. The services of the stakeholders and management are to be applied to make sure that the role of the organization is professional for the stakeholders who are investing their money. All the financial papers should be clear and there should be zero discrepancy between the original and the shown papers. Zero corruption and malpractice should be there in the different systems related to the contingency fees as well as the success rate of the commission. The need for the rotational change in the partners in terms of the auditing system is to be done for which the career and the auditing system is to be incorporated in a well-fashioned manner. The chance for the conduction of unethical business ideas as well as practices should be eliminated giving high priority to the task to make sure that the public interest is being generated an fulfilled. The development of all these aspects and for the maintenance of a transparent service in terms of audit should be the first priority through the development of the quality auditing system in the organization.
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