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The Downfall of Nortel Networks Essay

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ACC2366 Auditing Principles and Procedures |
Accounting/Auditing Scandal Part #2
|
The Downfall of Nortel Networks |


2/9/2014
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Many professional bodies employ various methods to ensure that the profession and those members that belong to it have a framework within which to operate. The most common techniques include employing an ethical principles framework as well as rules of professional conduct. The accounting scandal that befell Nortel could have been avoided had certain ethical principles not been violated. As well, certain rules of professional conduct were not followed with regard to the audit of Nortel’s financial statements. While Deloitte & Touche were not charged with criminal wrongdoing, perhaps their integrity would not have been questioned if better care had been taken to observe the guidelines set out for the auditing profession.
Several ethical principles were violated with regards to the Nortel accounts. The Nortel executives were not trustworthy when they intentionally manipulated the financial statements. (French, 2013) However, Deloitte & Touche also did not disclose the irregularities that they observed to any higher authorities which violated the principles of trustworthiness, responsibility, and citizenship, which requires offenders be reported. The caring principle of intending to do no harm was violated as soon as Deloitte & Touche provided a clean opinion on Nortel’s financial statements after learning of the irregularities. (Sharp, 2012)
Rules of professional conduct are instituted to protect the profession and those who work within that profession. The most important of which is independence within the auditing profession. (Arens, 2013, p. 58) Deloitte & Touche were informed of Nortel’s accounting practices and approved of them. They then later audited those same accounts. (Sharp, 2012) In addition, Deloitte & Touche felt that they were being pressured to assist Nortel with correcting its...

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