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Forensic Investment

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Situation analysis Important internal controls that were ignored?
The auditors of Enron did fail in their task of providing a duty of care to all of the parties. The main reason for this is that they failed to correctly audit the assets and financial position of Enron resulting in all stakeholders having no clue about the forthcoming collapse of Enron. This resulted in the stakeholders facing a very critical condition or a phase where in they were not sure if they would be able to recover their investments and debts or not. The auditing process has revealed several issues and findings of problems within the accounting system and the same have been discussed as the primary areas of exposure, areas of possible mishandling of accounts receivable, possible mishandling in other accounting operations, Cause of the problems and the impact of the deficiency findings.

How Enron’s harsh Performance Review Committee (PRC) could have aided company executives in committing the fraud?
The auditors were required to consider the shortcomings in the financial statements of the firm and also analyze the frauds and imbalances in the financial statements in depth. Having failed to do this jeopardized the position of the investors as well as other stakeholders. It was clearly a company riddled with fraud and excess and its conduct drove it into bankruptcy. Analysts argue that individual behavior was not at the core of the firm's problems (Arens,Elder, Bensley., 2011).

Some factors that could explain why the falsifying of financial statements is occurring so frequently?
Lack of proper internal controls and maintenance of records seem to be an actual problem. Lack of supervision on the accounting function is also an intense problem. Increasing work and number of transactions is leading to inefficiencies in being able to manage all of the accounts and can lead to…...

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