Auditing GREG

Auditors have come into a department as part of a company-wide audit prior to issuing an audit opinion for the company’s financial reports. In a one- to two- page paper (not including the title and reference pages), explain what the staff should expect the auditors to do. Be sure to include the requirements of the Sarbanes Oxley Act in your explanation.

he usefulness of financial reports to readers depends on report quality. The conceptual framework for financial reporting categorizes qualitative characteristics of financial reports into two broad categories: fundamental qualitative characteristics, which include relevance and faithful representation, and enhancing qualitative characteristics, which make financial reports more useful and include comparability, timeliness, verifiability, and understandability. Presentation of financial reporting is limited by materiality and cost constraints. There exist differences in U.S. reporting requirements and the international requirements, although efforts have been undertaken to congregate the U.S. GAAP rules with the international financial reporting rules (Oxford Analytica, 2009). Differences in U.S. reporting requirements and international financial reporting are evident in terms of asset value, revenue recognition, research and development, inventory and discontinued operations.

It is a requirement by law that financial statements of a public company be audited by an external auditing body that reviews the company’s operations and the financial statements to ensure that they are accurate and are in conformity with proper internal controls. They also help cross-check financial statements for creative accounting tricks that companies can use to mislead the public. These include false reporting of revenue, assets, expenses and liabilities.

Forbes School of Business Faculty

References: Cunningham, C. (2005). The gain and pain of Sarbanes-Oxley. Forbes. Retrieved from http://www.forbes.com/2005/12/29/microsoft-guidant-sox-in_cc_1230soapbox_inl.html

Oxford Analytica. (2009). Accounting for a difference of opinion. Forbes. Retrieved from http://www.forbes.com/2009/12/14/global-accounting-standards-iasb-fasb-business-accounting-standards.html