So far, we have carried two articles on the issue of conflict of interest. One blogger suggested that I highlight specific examples so that the “theory’ that I have expounded could be better appreciated. I did mention at the end of my last article that today we will be discussing the major accounting scandals involving Enron and WorldCom and that these were the result of human failings to uphold high ethical standards. In both cases, commercial interest took precedence over allegiance to professional integrity. It has also been suggested that the Enron’s case was the biggest audit failure in American history. As a result of these scandals, the United States Government has passed the Sarbanes-Oxley Act of 2002 to restore the reliability of the public company audit process by, among others, prohibiting auditors from rendering consulting services for the company they are auditing.
I alluded to the fact that this problem was recognized as far back as 1993 in Guyana in relation to the audits of State-owned/controlled entities. Prior to then, most of the public corporations and entities in which the State had controlling interest were audited by a private auditing firm without the involvement of the Auditor General. Many of these entities were in dire financial difficulties, yet the auditors’ reports reflected in most cases unqualified opinions and there were hardly any warning