scholarly journals Factors causing Enron’s collapse: An investigation into corporate governance and company culture

2011 ◽  
Vol 8 (3) ◽  
pp. 585-593 ◽  
Author(s):  
Huu Cuong Nguyen
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Corporate Culture ◽  
Internal Audit ◽  
Governance Structures ◽  
Fraudulent Financial Reporting ◽  
Internal Auditor ◽  
Whistle Blowing ◽  
Top Executives ◽  
Company Culture

This paper investigates and evaluates the weaknesses of Enron’s corporate governance structures, weaknesses that lead to the collapse of the company. Overall, poor corporate governance and a dishonest culture that nurtured serious conflicts of interests and unethical behaviour in Enron are identified as significant findings in this paper. Employing the case study method, the paper synthesizes, analyses, and interprets all aspects of corporate governance that lead to Enron’s collapse based on three main reports: The Powers Report (Powers, Troubh and Winokur 2002), the Testimony of Chief Investigation (Roach 2002), and The Subcommittee’s Report (United States Senate’s Permanent Subcommittee on Investigations 2002). Firstly, Enron’s Board of Directors failed to fulfil its fiduciary duties towards the corporation’s shareholders. Secondly, the top executives of Enron were greedy and acted in their own self-interest. Thirdly, many of Enron’s employees witnessed the wrongdoings of Enron’s top executives, and quite a few whistleblowers came forward. Lastly, Enron outsourced external auditing for its internal audit function instead of establishing a functionally internal audit mechanism and its external auditor acquiesced in the application of questionable accounting and fraudulent financial reporting. Although Enron’s collapse has been widely discussed in the literature, no paper has been found that synthesizes the various aspects of corporate governance that resulted in the Corporation’s collapse. This paper contributes to the literature on the numerous weaknesses of Enron’s corporate governance structures, including the following: the role of the Corporation’ board, especially its top executives; the Corporation’s corporate culture and whistle-blowing system; and the Corporation’s internal auditor and external auditors.

Enhancing Financial Reporting Quality through Corporate Ethics Commitment: A Malaysian Review

2021 ◽  
Vol 12 (1) ◽  
pp. 72-72
Author(s):  
Noorul Azwin Md Nasir ◽  
Hafiza Aishah Hashim ◽  
Noorshella Che Nawi ◽  
Mohd Nor Hakimin Yusoff ◽  
Nur Athirah Mohd Aluwi
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Corporate Culture ◽  
Ethical Issues ◽  
Code Of Ethics ◽  
Reporting Quality ◽  
Warning Signs ◽  
Financial Reporting Quality ◽  
Corporate Ethics ◽  
Ethical Misconduct

A rising number of cases involving ethical misconduct within firms have of late received considerable attention in Malaysia. Despite the country's declaring having a strong corporate governance policy, strengthened through the Code of Ethics for Company Directors and Malaysia Code of Corporate Governance, the unethical practices and lack of integrity within firms remain an issue. PricewaterhouseCoopers (PwC) Malaysia conducted a survey in 2018, it was found that 41 percent of Malaysian registered companies were guilty of committing some forms of economic crimes, specifically business misconduct, asset misappropriation, bribery, and corruption. They added, the actual number may be higher due to many cases of ethical misconduct that typically go unreported. Furthermore, crimes of ethical misconduct in Malaysia have also increased by 28 percent in the last two years. It was revealed taht corporate culture was the most influential element in helping detect early warning signs of ethical misconduct within a firm. A KPMG 2019 report published in the subsequent year also suggested that an unhinged desire for a wealthy lifestyle acts as a prime motivation behind many of the unethical behaviors discovered. Thus, in the light of the increasingly worsening situation of ethical misconduct in Malaysian firms, the need to explore these corporate ethical issues has never become more crucial and appropriate. The ubiquitous nature of the issue has subsequently jeopardized the financial reporting quality of Malaysia's firms. Keywords: Corporate Ethics, Corporate Governance, Earnings Management, Financial Reporting Quality

Fraudulent Financial Reporting: An Application of Fraud Pentagon Theory to Association of Southeast Asian Nations Corporate Governance Scorecard

2019 ◽  
Vol 9 (5) ◽  
pp. 1729 ◽  
Author(s):  
Imang Dapit PAMUNGKAS ◽  
St. Dwiarso UTOMO
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Financial Stability ◽  
Sampling Technique ◽  
External Pressure ◽  
Managerial Ownership ◽  
Fraudulent Financial Reporting ◽  
Audit Opinion ◽  
Opinion Change ◽  
Insignificant Effect

This study aims to detect and examine fraudulent financial reporting by applying fraud pentagon theory to all companies implementing the Association of Southeast Asian Nations (ASEAN) Corporate Governance Scorecard in Indonesia. This study has the following objectives: to examine and analyze the effect of financial stability, external pressure, financial target, nature of industry, audit opinion, change of directors, managerial ownership against fraudulent financial reporting. In this research, we use correlation research type. The population of this sample is all sectors of companies listed on the Indonesia Stock Exchange. Using sampling technique in the form of Purposive Sampling Technique applying ASEAN Corporate Governance Scorecard in Indonesia with research period of 2012 to 2016, which produce 30 samples, multiple linear regression analysis using SPSS version 22. The results of this study found that financial stability, managerial ownership has a negative and insignificant effect on fraudulent financial reporting. External pressure, nature of industry has a negative and significant effect on fraudulent financial reporting. Financial Target, Audit Opinion, Change of Directors has a positive and insignificant effect on Fraudulent Financial Reporting.

Chief Audit Executives' Evaluations of Whistle-Blowing Allegations

2012 ◽  
Vol 24 (2) ◽  
pp. 87-99 ◽  
Author(s):  
Cynthia P. Guthrie ◽  
Carolyn Strand Norman ◽  
Jacob M. Rose
Keyword(s):  
Financial Reporting ◽  
Internal Audit ◽  
Internal Controls ◽  
Whistle Blowing

ABSTRACT This study examines the effects of the source of whistle-blowing allegations and potential for allegations to trigger concerns about reputation threats on chief audit executives' handling of whistle-blowing allegations. The participants for this study, chief audit executives (CAEs) and deputy CAEs, evaluated whistle-blowing reports related to financial reporting malfeasance that were received from either an anonymous or a non-anonymous source. The whistle-blowing reports alleged that the wrongdoing resulted from either the exploitation of substantial weaknesses in internal controls (suggesting higher responsibility of the CAE and internal audit) or the circumvention of internal controls (suggesting lower responsibility of the CAE or internal audit). Findings indicate that CAEs believe anonymous whistle-blowing reports to be significantly less credible than non-anonymous reports. Although CAEs assessed lower credibility ratings for the reports alleging wrongdoing by the exploitation of substantial weaknesses in internal controls, they allocated more resources to investigating these allegations.

Fraudulent Financial Reporting: Consideration of Industry Traits and Corporate Governance Mechanisms

2000 ◽  
Vol 14 (4) ◽  
pp. 441-454 ◽  
Author(s):  
Mark S. Beasley ◽  
Joseph V. Carcello ◽  
Dana R. Hermanson ◽  
Paul D. Lapides
Keyword(s):  
Health Care ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Financial Services ◽  
Audit Committee ◽  
Internal Audit ◽  
Financial Statement ◽  
Audit Committees ◽  
Financial Statement Fraud ◽  
Governance Mechanisms

This paper provides insight into financial statement fraud instances investigated during the late 1980s through the 1990s within three volatile industries—technology, health care, and financial services—and highlights important corporate governance differences between fraud companies and no-fraud benchmarks on an industry-by-industry basis. The fraud techniques used vary substantially across industries, with revenue frauds most common in technology companies and asset frauds and misappropriations most common in financial-services firms. For each of these three industries, the sample fraud companies have very weak governance mechanisms relative to no-fraud industry benchmarks. Consistent with prior research, the fraud companies in the technology and financial-services industries have fewer audit committees, while fraud companies in all three industries have less independent audit committees and less independent boards. In addition, this study provides initial evidence that the fraud companies in the technology and health-care industries have fewer audit committee meetings, and fraud companies in all three industries have less internal audit support. This study of more current financial statement fraud instances contributes by updating our understanding of fraud techniques and risk factors in three key industries. Auditors should consider the industry context as they evaluate the risk of financial fraud, and they should compare clients' governance mechanisms to relevant no-fraud industry benchmarks.

An Examination of the Effect of Inquiry and Auditor Type on Reporting Intentions for Fraud

2011 ◽  
Vol 30 (4) ◽  
pp. 29-49 ◽  
Author(s):  
Steven E. Kaplan ◽  
Kelly Richmond Pope ◽  
Janet A. Samuels
Keyword(s):  
Experimental Study ◽  
Financial Reporting ◽  
Fraudulent Financial Reporting ◽  
Hypothetical Situation ◽  
Internal Auditor ◽  
External Auditors ◽  
Additional Information ◽  
Different Types ◽  
External Auditor ◽  
Reporting Intentions

SUMMARY Employee tips are the most common form of initial fraud detection, suggesting that employees frequently are aware of fraud before others professionally charged to detect fraud, such as internal and external auditors. Given the seriousness of fraud to a range of stakeholders, it is important to increase our understanding of the willingness of employees who learn about fraud to report this information to auditors. We conduct an experimental study describing a hypothetical situation involving an employee's discovery of a fraudulent act by his supervisor. Given the hypothetical situation, participants, assuming they were facing the situation, provide their intentions to report fraud to an auditor. The study examines several issues related to participants' intentions to report fraud to auditors. First, we predict and find that participants' reporting intentions to an inquiring auditor are stronger than their reporting intentions to a noninquiring auditor. Second, we predict and find that participants' reporting intentions to an internal auditor are stronger than their reporting intentions to an external auditor. Third, based on contrast coding results, we predict and find that inquiry and auditor type interact to influence reporting intentions. Fourth, we find that reporting intentions for two different types of fraudulent acts, misappropriation of assets and fraudulent financial reporting, do not significantly differ, nor does the type of fraudulent act interact with whether the auditor engages in inquiry or the report recipient (e.g., internal versus external auditor). Supplemental analysis provides additional information on the extent to which beliefs differ between the two types of fraudulent acts.

scholarly journals The Triangle Defense for Financial Reporting Quality: The Interplay between Internal Auditing, the Audit Committee, and the External Auditor

Wahana ◽  
2020 ◽  
Vol 23 (1) ◽  
pp. 112-130
Author(s):  
Djoko Susanto
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Audit Committee ◽  
Academic Research ◽  
Internal Audit ◽  
Reporting Quality ◽  
Financial Reporting Quality ◽  
Working Relationships ◽  
External Auditors ◽  
External Auditor

The internal audit function, audit committee, and external auditor are three crucial stakeholders of corporate governance that safeguard the quality of financial reporting. In this article, I discuss the interrelationships between these monitoring mechanisms. I also provide insights about what we have learned from academic research about the working relationships between these three governance entities. This article should be of interest to academic researchers as well as to corporate stakeholders, which include management, investors, regulators, and Dewan Komisaris members. Future researchers can make use of this article as they contribute more work in areas related to auditing, monitoring and corporate governance, and financial reporting quality. Insights from this article can also guide corporate stakeholders to assess the effectiveness of the internal audit, audit committee, and external auditors in their organizations.

scholarly journals The Effectiveness of Enterprise Risk Management and Internal Audit Function on Quality of Financial Reporting in Universities

2017 ◽  
Vol 9 (4(J)) ◽  
pp. 230-241
Author(s):  
Wadesango N ◽  
Mhaka C.
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Reporting ◽  
Internal Audit ◽  
Enterprise Risk Management ◽  
State Universities ◽  
Internal Audit Function ◽  
Enterprise Risk ◽  
The Impact

This study examined the impact of enterprise risk management (ERM) and internal audit function (IAF) on the financial reporting quality (FRQ) of state universities in Zimbabwe. Utilizing a dataset of 250 respondents from across nine (9) state universities, the researchers examined the effectiveness of ERM and the IAF on the quality of financial reporting in state universities. The researchers employed the contingency theory and studied each university separately to report on items that are specific to each and then also establish a commonality in the definition of parameters to be used in setting up the benchmark against which future performance may be measured. The findings were that there is a strong and significant relationship between ERM and the FRQ and also that there is a positive relationship between the internal audit function and FRQ. Quality internal audit results improved corporate governance systems. The results also underscore the significance and need for central government to establish and monitor a system of good ERM processes that minimize corporate governance breaches and enhance integrity and independence in financial reporting in state universities.

scholarly journals Corporate governance and Chinese ghost cities

2016 ◽  
Vol 13 (4) ◽  
pp. 249-265
Author(s):  
Hugh Grove ◽  
Mac Clouse
Keyword(s):  
Corporate Governance ◽  
Financial Reporting ◽  
Accounting Standards ◽  
International Accounting ◽  
International Accounting Standards ◽  
Fraudulent Financial Reporting ◽  
The U.S ◽  
International Accounting Standards Board

Sir David Tweedy, the former chair of the International Accounting Standards Board, observed: “The scandals that we have seen in recent years are often attributed to accounting although, in fact, I think the U.S. cases are corporate governance scandals involving fraud” (Tweedy, 2007). This paper will show that many of the recent Chinese cases of fraudulent financial reporting are also really corporate governance scandals involving fraud.

scholarly journals PELAKSANAAN FUNGSI APARAT PENGAWAS INTERN PEMERINTAH (APIP) UNTUK MENUNJANG TINGKAT KEWAJARAN LAPORAN KEUANGAN PEMERINTAH KOTA MANADO

2016 ◽  
Vol 7 (2) ◽  
Author(s):  
Merry Inggrid Siwy ◽  
David P.E. Saerang ◽  
Herman Karamoy
Keyword(s):  
Control System ◽  
Local Government ◽  
Financial Reporting ◽  
Internal Control ◽  
Financial Management ◽  
Internal Audit ◽  
Financial Statements ◽  
Internal Auditor ◽  
Internal Control System ◽  
The Government

Internal Audit is the whole process of audit activities, the Review, evaluation, monitoring and supervisory activities other against the implementation of tasks and functions of the organization in order to provide reasonable assurance that the activities have been carried out in accordance with the benchmarks that have been set effectively and efficiently for the benefit of the leadership to Realize good governance.Accountability and transparency in the new government could be achieved if all levels of leadership controlling activities on the overall activities in their respective agencies . Internal control system ( SPI ) is a process that is integral to the actions and activities carried out continuously by the management and all employees to provide reasonable assurance on the achievement of organizational goals through effective and efficient , the reliability of financial reporting , the safeguarding of state assets, and compliance with legislation. To strengthen and support the effectiveness of internal control over the SPI made ​​implementation of tasks and functions of government agencies including state audits carried out by the internal control official Government ( APIP ) .The auditor's responsibility to detect fraud or irregularity embodied in the planning and execution to obtain reasonable assurance about whether the financial statements have been prepared in accordance with established standards.The purpose of this study was to analyze the functions of Government Internal Supervisory Apparatus (APIP) / Internal Auditor in supporting reasonable levels of Local Government Finance Report Manado City. Respondents were selected are few skilled examiner at the office of the Inspectorate of Manado. Approach Using Qualitative methods Ethnography.APIP functions that work well to prevent fraud , to produce valuable output to be input to the external auditor , the executive and the legislature to improve financial management and accountability in the area of ​​the future . Eksternal Auditor may use the results from the monitoring APIP mainly reviews the financial statements of the government , supporting the management of local government in implementing the recommendations and improvements  Internal control system . APIP professional and independent encourage increased transparency and accountability in financial management to improve the fairness of the financial statements . Keywords: Government Internal Supervisory Apparatus, fraud detection, the fairness of the financial statements

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