AGGRESSIVE ACCOUNTING, BIAS IN AUDITING AND ENRON

Accounting is sometimes called the "language of business". Accounting provides managers with the tools they need to plan effective and focus attention on deviations from that plan, direct daytoday operations and arrive at the best solution to the operating problems faced by the organization. However, as the language of business, accounting is also used by those outside the organization to make decisions that directly affect the company. This research considers two areas that can affect the reliability of accounting dataùaggressive accounting and bias in auditingùand the environment that led to accounting difficulties at Enron.

Aggressive accounting differs from conventional accounting techniques in that it strives to present the company's information in the most attractive terms as possible. While aggressive accounting does not encourage prevarication, it does strive to present an environment in which favorable information is considered and used over information that puts the company at risk. For example, a company might change its inventory valuation from last-in-first-out (LIFO) to first-in-first-out (FIFO) to gain a better relationship between assets on the balance sheet. This is an example of aggressive accounting: the change is not illegal, but there is no overwhelming accounting reason why the change needs to take place (Curan, 1995). Another example of aggressive accounti

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p when considering the way that auditors gather evidence during the performance of their tasks. The decisions and choices that auditors make during this process determine the course of the audit, and can have a significant impact on the audit findings. Because of this, the beliefs that an auditor has going into the process may influence the outcome of the evidence search that, in turn, influences the outcome of the audit (McMillan & White, 1993). Confirmation bias suggests that auditors may work to confirm their beliefs about a company and thus will favor information that confirms rather than refutes their assessments. In this way, the beliefs that an auditor has going into an audit may well be unlikely to change as a result of the information uncovered in the audit. This may well be due to an unwitting elimination of information that does not support the beliefs of the auditor. The process becomes a series of self-fulfilling issues: expecting to find certain information, the auditor discounts that information which does not conform to his hypothesis and thus finds the information he expects. Auditors who use an environmental frame rather than an error frame generally are more open to information that both refutes and supp
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Some common words found in the essay are:
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Approximate Word count = 1566
Approximate Pages = 6 (250 words per page)