As an auditor as you know will have to go through three stages of audit preparation, audit execution and audit completion. At the audit preparation stage, the auditor should learn more about the company, especially the company's internal control system and accounting methods. When accepting the contract and performing the audit, the company should be advised on correcting the revenue recognition. Next, the debts that the company conceals through other entities need to be clearly disclosed and regulated.

If the company refuses to amend in accordance with the auditor's opinion, the auditor may issue an adverse opinion (when sufficient audit evidence is available) or disclaim it without an opinion because these are the material and pervasive misstatement of revenue

B) As an auditor, in which way can you make sure such scandals will not happen in your career path?

Auditors should have:

- Professional attitude, professional skepticism

- Ensure independence when conducting audits

- Consider the risk of accepting the client and assess the contract risk

- Understanding customers and operating environment

- Learn accounting policies and business cycles

- Perform preliminary analysis of financial statements

- Consider possible risks of the members of the audit team

- Independence and Objectivity: Maintain independence and objectivity throughout the auditing process. Avoid conflicts of interest and ensure that your judgments and decisions are based on facts and professional judgment rather than personal or external influences.

- Professional Skepticism: Adopt a skeptical mindset and question assumptions. Exercise professional skepticism to critically evaluate the evidence, identify red flags, and dig deeper when inconsistencies or unusual patterns are observed.

- Risk Assessment: Conduct a thorough risk assessment to identify potential areas of fraud, misstatement, or unethical behavior. Understand the client's business and industry, assess internal controls, and identify areas where fraud risks may be higher.

- Compliance with Professional Standards: Adhere to the professional standards and guidelines set by relevant regulatory bodies, such as the International Standards on Auditing (ISAs). These standards provide a framework for conducting high-quality audits and help ensure that auditing procedures are carried out effectively.

- Adequate Planning and Execution: Develop a comprehensive audit plan that is tailored to the client's specific risks and circumstances. Execute the audit procedures diligently, gathering sufficient and appropriate evidence to support your conclusions.

- Internal Control Evaluation: Assess the effectiveness of the client's internal controls, including those related to financial reporting, fraud prevention, and detection. Identify any weaknesses or deficiencies and provide recommendations for improvement.

- Professional Development and Training: Stay updated with the latest auditing techniques, regulations, and industry trends through continuous professional development. Attend relevant training programs, seminars, and conferences to enhance your knowledge and skills.

- Effective Communication: Maintain open and effective communication with your audit team, client management, and relevant stakeholders. Clearly communicate audit findings, risks, and recommendations in a professional and objective manner.

- Whistleblower Programs: Encourage and support the implementation of whistleblower programs within client organizations. Provide guidance on reporting mechanisms and promote a culture of integrity and ethical behavior.

- Collaboration with Other Professionals: Collaborate with other professionals, such as forensic accountants, legal experts, and regulatory authorities, when necessary. Share information and insights to enhance the effectiveness of fraud detection and prevention efforts.

B) As an auditor, there are several ways to mitigate the risk of such scandals occurring:

1. Professional Skepticism: Maintaining a skeptical mindset and critically questioning the information provided by management is crucial. It involves actively seeking and evaluating contradictory evidence and being cautious of potential fraud or misstatements.
2. Independence and Objectivity: Upholding independence and objectivity is fundamental in ensuring unbiased and impartial audit opinions. Avoiding conflicts of interest and maintaining professional skepticism are essential to providing reliable and accurate audit services.
3. Compliance with Standards and Regulations: Adhering to professional auditing standards and regulations, such as the International Standards on Auditing (ISAs), is essential. Staying updated with changes in accounting and auditing standards and applying them diligently during audits helps ensure the highest level of quality and integrity.
4. Adequate Professional Training and Development: Continuously enhancing knowledge, skills, and expertise through ongoing professional training and development is crucial. Staying informed about emerging risks, auditing techniques, and industry developments helps auditors adapt and respond effectively to evolving challenges.
5. Effective Communication and Reporting: Providing clear and transparent communication to stakeholders is vital. Reporting any identified irregularities, weaknesses in internal controls, or concerns about potential fraud promptly and accurately helps safeguard the interests of stakeholders and the integrity of the financial reporting process.
6. Collaboration with Audit Committee and Management: Maintaining open and constructive communication with the audit committee and management fosters a strong working relationship. Regular discussions and consultations help ensure a thorough understanding of the business, facilitate transparency, and enable effective risk assessment and mitigation.

In the case of Enron, there were several red flags that should have raised concerns for the auditor. For example, the complexity of Enron's financial transactions, the high levels of related-party transactions, and the lack of transparency in the company's financial reporting should have warranted further investigation. Additionally, the auditor should have scrutinized the off-balance-sheet entities and assessed the appropriateness of the accounting treatment.

B. One way is to ensure that you are always ethical and professional in your work. You should also be diligent in your work and always follow the rules and regulations set by the accounting profession. Additionally, you should always be aware of the risks associated with your work and take steps to mitigate those risks .

In addition, if auditors can’t obtain appropriate evidence from Enron, they would express disclaimer opinion

2)
First, auditors must heighten their awareness of their independent role, as they already have done by indicating that they will not consult for their audit clients. 

Second, in Enron, auditors allegedly changed their opinions, notwithstanding knowledge of the facts, between the time they approved revenue recognition on controversial transactions and the time of the respective restatements. The obvious lesson here is prudence: auditors should think carefully before making a judgment that they may have to revisit later. To insure prudence, auditors should consider the effects of disclosure. Assume that others will reach an opposite conclusion on issues that can go either way, and that thes e dissenting judgments will be disclosed. 

Third, auditors should support systems that increase the probability of identifying irregularities. They should first insist that companies have written policies and procedures for all aspects of accounting and transaction processing, as well as an ethics statement. Most finance personnel are familiar with written policies from their professional training, and this task will stimulate their professional interest in keeping up with current accounting topics.

Fourth, very strong arguments can be made for companies changing auditing firms every 3-4 years. This would encourage auditors to be prudent so as to avoid second-guessing by the ir successors, and would require improvement in auditing documentation to allow transfer of a client to new auditors. If auditing firms resist these reform, they will have a greater duty to justify their tenure by insuring that all auditors on an engagement are trained in the nuances of the client’s business and the accounting issues that may arise. Auditors then must tailor their audits or quarterly financial reviews to those risks.