Enron: sad but inevitable

Revsine, Lawrence

doi:10.1016/s0278-4254(02)00044-3

Cited by 37 publications

(14 citation statements)

References 2 publications

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“…5 See § 171(2) German Stock Companies Act. 6 See, e.g., Benston and Hartgraves (2002), Demski (2002) and Revsine (2002). auditor. Moreover, an audit committee oversees and monitors the accounting, financial reporting, internal control and internal auditing processes of the firm.…”

Section: Introductionmentioning

confidence: 99%

Reputation concerns and herd behavior of audit committees – A corporate governance problem

Schöndube-Pirchegger

Schöndube

2011

Journal of Accounting and Public Policy

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Section: Introductionmentioning

confidence: 99%

Reputation concerns and herd behavior of audit committees – A corporate governance problem

Schöndube-Pirchegger

Schöndube

2011

Journal of Accounting and Public Policy

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“…The cost to the public of audit failure is enormous and extends well beyond the monies lost by the shareholders and creditors, as it includes loss of confidence in the audit report and in financial markets (Diamond, 2005). Previous academic and professional research suggests that, at least to some extent, these audit failures were a matter of choice by Andersen, and therefore, an ethical lapse (Benston and Hartgraves, 2002;Duska, 2005;Revsine, 2002;Toffler and Reingold, 2003).…”

Section: Introductionmentioning

confidence: 99%

Andersen and the Market for Lemons in Audit Reports

2006

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Previous accounting ethics research berates auditors for ethical lapses that contribute to the failure of Andersen (e.g., Duska, R.: 2005, Journal of Business Ethics 57, 17–29; Staubus, G.: 2005, Journal of Business Ethics 57, 5–15; however, some of the blame must also fall on regulatory and professional bodies that exist to mitigate auditors’ ethical lapses. In this paper, we consider the ethical and economic context that existed and facilitated Andersen’s failure. Our analysis is grounded in Akerlof’s (1970, Quarterly Journal of Economics August, 488–500) Theory of the Market for Lemons and we characterize the market for audit reports as a market for lemons. Consistent with Akerlof’s model, we consider the appropriateness of the countervailing mechanisms that existed at the time of Andersen’s demise that appeared to have effectively failed in counteracting Andersen’s ethical shortcomings. Finally, we assess the appropriateness of the remedies proposed by the Sarbanes–Oxley Act of 2002 (SOA) to ensure that similar ethical lapses will not occur in the future. Our analysis indicates that the SOA regulatory reforms should counteract some of the necessary conditions of the Lemons Model, and thereby mitigate the likelihood of audit failures. However, we contend that the effectiveness of the SOA critically depends upon the focus and attention of theâ\x90£Public Companies Accounting Oversight Board (PCAOB) towards assessing the ethical climates of public accounting firms. Assessments by the PCAOB of public accounting firm’s ethical climate are needed to sufficiently ensure that public accounting firms effectively promote and maintain audit quality in situations where unconscious bias or economic incentives may erode the public accounting firm’s independence. Copyright Springer 2007auditor independence, audit quality, information asymmetry, market for lemons, public interest,

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“…The irrelevance of debates over principles vs. rules is admitted by some commentators, who have offered various alternatives. Revsine (2002), for instance, proposed that companies be allowed to use any reasonable set of guidelines but also be required to provide full disclosure regarding those guidelines, allowing readers to evaluate both the guidelines and resulting financial reports. Ronen (2002) proposed the establishment of a 'financial insurance service', whereby insurance companies assess reporting risk, provide insurance to investors, and hire auditors, who would set fees according to the assurance level negotiated by the insurance company and the investors.…”

Section: The Debate Regarding Principles Vs Rulesmentioning

confidence: 99%

Rules, rogues, and risk assessors: Academic responses to Enron and other accounting scandals

Ravenscroft

Williams

2005

European Accounting Review

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The recent accounting scandals in the USA and the resulting regulation of the US profession via the Sarbanes-Oxley Act have led to the resurrection of an old debate: principles vs. rules. We argue that such a debate is jejune and serves as little more than a diversion from discussing more substantive issues raised by events like Enron and Andersen. Accounting is not confronted by a choice of principles to the exclusion of rules or vice versa. Principles underlie any set of rules, and any implementation of principles will inevitably involve adopting some rules. We take issue with various analyses of the accounting scandals that rely too exclusively on the principles of neo-classical economics. We conclude by identifying four major obstacles impeding meaningful academic and educational treatment of the maladies of which Enron is merely a symptom.Rules versus principles, accounting education, decision-usefulness, accounting scandals,

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Enron: sad but inevitable

Cited by 37 publications

References 2 publications

Reputation concerns and herd behavior of audit committees – A corporate governance problem

Reputation concerns and herd behavior of audit committees – A corporate governance problem

Andersen and the Market for Lemons in Audit Reports

Rules, rogues, and risk assessors: Academic responses to Enron and other accounting scandals

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