The auditor's task is to go beyond GAAP to determine which application of a generally accepted accounting principle best portrays economic activity, or to determine whether management's estimate of the amount of obsolescence in the company's inventory is correct. Enron and Worldcom provide a decent example of a case where technical adherence to GAAP did not adequately portray the company's economic position.
QUESTION 1: What were the common aspects that were necessary for the Enron and WorldCom debacles to occur?