Hih Collapse

In: Business and Management

Submitted By ryang
Words 7735
Pages 31
Auditing disclosures play an important role within accounting reports as they provide a level of assurance to the users (public). These disclosures will be discussed in light of the collapse of Health International Holdings (HIH). The HIH collapse warranted a Royal Commission investigation and also recorded the biggest corporate collapse in Australia's history. Corporate failures of similar magnitude such as Enron and Parmalat have occurred elsewhere and sparked large scale investigation and media scrutiny. In all of these corporate failures, the level or absence of disclosure has had a lot to do with the unexpectedness of the collapse. This paper analyses the HIH collapse within a Foucaldian framework to demonstrate the need for accountants and auditors to work together so as to avoid criticism of the profession arising from unexpected corporate failures in the future.
The purpose of this paper is to analyse the collapse of HIH and the role of its auditor, Andersen, within a Foucauldian framework encompassing archeology and genealogy of power and knowledge. The mythical Jedi force is used as a metaphor for power attained by the accounting profession through its claim to superior knowledge and skill to be applied in the public interest. Accordingly, the force includes professional ethics. The dark side is used as a metaphor for the collapse of HIH because accounting standards and practices, the accounting profession's power base, were used to conceal impending collapse resulting in the escalation of losses to policy holders, creditors and the general public.
Regulatory responses to the Royal Commission into the collapse of HIH are viewed for purposes of this paper as the return of the Jedi in that the Corporate Law Economic Reform Programme (CLERP 9) proposals are aimed at strengthening corporate governance including auditor…...

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