Avoiding Another Enron: The Role of the External Auditor in Financial Regulation and Supervision

Global Auditing: Concepts and Concerns, ICFAI University Press

11 Pages Posted: 22 May 2009 Last revised: 19 Jan 2011

See all articles by Marianne Ojo D Delaney PhD

Marianne Ojo D Delaney PhD

American Accounting Association; Centre for Innovation and Sustainable Development (CISD); Centre for Innovation and Sustainable Development (CISD)

Date Written: April 19, 2006

Abstract

Following the collapse of Enron, many questions have been raised as to why the UK has avoided its Enron. Many commentators have considered whether this is due to the fact that the UK's system of financial regulation relies more on a principles based system, which promotes more fairness in its application as opposed to a rules based system. However, the crucial roles played by auditors in financial reporting and the system of financial regulation and supervision have been overlooked to an extent. In view of a spate of financial scandals such as those of Enron, Worldcom, Tyco, etc., the US Congress acted swiftly by enacting the Sarbanes Oxley Act on July 30 2002 with the aim of protecting investors and restoring their confidence in the financial system. Amongst the provisions within the Sarbanes Oxley Act, the prohibition of non-audit services by auditors providing audits at that particular time, is a main feature of the Act. This provision not only highlights the importance of the role of the external auditor, but also emphasizes the fact that safeguards are essential in order to prevent that role from being abused. Much as there are lessons which could be learned from the supervisory approaches adopted by various jurisdictions, there are also considerations on whether these jurisdictions could benefit from the measures implemented by US regulators and accounting bodies in the aftermath of Enron.

Keywords: Financial, Regulation, Enron, Sarbanes Oxley, External Auditor

Suggested Citation

Ojo D Delaney PhD, Marianne, Avoiding Another Enron: The Role of the External Auditor in Financial Regulation and Supervision (April 19, 2006). Global Auditing: Concepts and Concerns, ICFAI University Press, Available at SSRN: https://ssrn.com/abstract=1407181

Marianne Ojo D Delaney PhD (Contact Author)

American Accounting Association ( email )

5717 Bessie Drive
Sarasota, FL 34233-2399
United States

Centre for Innovation and Sustainable Development (CISD) ( email )

United States

Centre for Innovation and Sustainable Development (CISD) ( email )

United States

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