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By Grace Mburu

The position of trust that auditors have enjoyed for decades has been put to the test in recent years, leaving stakeholders wondering whether the twenty first century auditor is an accomplice or an adversary of white-collar crime.
In 2001, the Enron accounting and corporate fraud cost its shareholders upwards of US$70 billion leading to
bankruptcy of their auditor, Arthur Andersen, one of the largest audit firms in the world at the time.
Arthur Andersen was found guilty of illegally destroying documents relevant to the U.S. Securities and Exchange Commission investigation.
Subsequently, Arthur Andersen’s license to audit public companies was voided and the firm eventually collapsed.
Shortly thereafter, the Sarbanes Oxley Act (SOX) was enacted to increase accountability of auditing firms. Through enhanced corporate governance measures, SOX envisioned sustained independence of auditors which would in turn offer stakeholder protection. Research findings on the impact of SOX observed that organisations subject to SOX were significantly more transparent and their financial statements were perceived to be
more reliable. Conversely, the research findings also indicated that organisations with reported material weaknesses had significantly higher fraud.



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