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Finance Manager

Question #1

Finance managers have to work with several parties within an organization to ensure that controls are in place. Financial controls are needed in any organization that has employed people to make sure that all expenses are paid up among other things. One of the main players is an audit firm. Normally, audit firms operate independently to make sure that they assess the financial controls in place in an objective manner. Financial managers often seek the help of audit firms to validate the financials so that issues such as misappropriation of funds, corruption, and fraud are avoided. The auditors use the check and balances in the institution to assess how the financial system is set up (Gaynor et al., 2016). These checks will reveal whether the financial managers and their team have been recording transactions as they should and whether the flow of funds is as expected.

Another group that is concerned about the financial state of an organization is the investor group. Investors often have a vested interest in a firm through their investment. They inject money into a firm seeking to earn returns from their investment. As such, they are interested in the financial management of an organization to ensure that the utilization of funds is done in such a way that it will bring the desired results. Specifically, investors assess the financial controls instituted and utilized in an organization to understand the return on investment results. Their interest is often one-sided. For them, their main objective is to put pressure on the firm to make good use of their investment so that they can receive huge dividends. For this reason, they are allowed to voice their concerns regarding the way an organization is using the funds availed by the investors (Knechel & Salterio, 2016). In this manner, the investors act as a check and balance financial apparatus that the financial manager must contend with in an organization.

Question #2

An example of a company that went down due to a disjoint between auditors and the financial manager is Enron. In this case, the firm was found to have gross errors in the way the transactions were maintained in the books of account in the year 2001 (Boddy, 2017). Further, there was a lot of cover-up on illegal transactions that were eventually exposed which led to huge financial losses for the workers of the firm in the form of pensions. The company had been deducting the employees’ money for pension only to misuse these funds, mainly for personal use. The firm used off-balance-sheet special purpose vehicles to mask the huge debt the firm had accumulated. The firm should have fallen a long time ago but was kept alive by the finance department’s unethical ingenuity to cover everything up. As such, more people kept investing in the firm.

There were further efforts aimed at hiding the truth from auditors from the government as well as the public. This was facilitated by accounting firms that the company utilized namely the Andersen LLP. Later on, the truth came out and the extent of the damage done was evident. As a result of the exposition, the firm’s shares moved from $90.75 to $0.26. the shareholders of the firm lost $74 billion in the four years leading up to the filing for bankruptcy by Enron (Bhaskar & Flower, 2019). Clearly, the downfall was hard for the firm.




Bhaskar, K., & Flower, J. (2019). Financial failures and scandals: From Enron to Carillion. Routledge.

Boddy, C. R. (2017). Enron scandal. Encyclopedia of Business and Professional Ethics, 1-4.

Gaynor, L. M., Kelton, A. S., Mercer, M., & Yohn, T. L. (2016). Understanding the relation between financial reporting quality and audit quality. Auditing: A Journal of Practice & Theory35(4), 1-22.

Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Routledge.


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