Audit framework Essay Example | Topics and Well Written Essays - 1500 words

Audit framework - Essay Examplethe statutory audit report is a must for the society in the presentation of their balance sheet, income statement and statement of cash flows.The standard statutory audit is characterised by an auditor performs normal auditing procedures to order of battle that the financial statements are more credible than if no international auditors opinion is attached. The statutory audit is implemented in order to prevent frauds and illegal acts.As proof,Enrons income statement was window dressed. The company had recorded sales transactions that had never happened. Consequently, these fraudulent transactions would translate to higher sales. Higher sales would give a higher net income. a higher net income would give us a higher net assets. a higher sales would generate a higher birthholders equity. In addition, the company did not record some of its losses. Enron had fraudulently window -dressed by presenting these Enron losses as losses of its off -shore compa nies. as a result, the unrecorded losses resulted to a net income that is higher than what the real net income should be. Convincingly, Enrons income statement was window dressed (Fusaro, and Miller 2002, 107)Also, Enron and Arthur Andersen knew that recording fictitious sales and moolah would increase stockholder investments. Enron and Arthur Andersen knew that recording fictitious sales and mesh would increase stockholder investments. Enron and Arthur Andersen knew that recording fictitious sales and profits would increase stockholder investments. The elderberry bush management officers connived with the accounting officers of Enron to prepare the fraud -laden financial statement in complete violation the harmonization standards set by violating the international accounting standards pass on this fraudulent goal. Clearly, Enron and Arthur Andersen knew that recording fictitious sales and profits would increase stockholder investments (Madrick 2002).urthermore, the WorldCom and Enron accounting scandals are two of the reasons that triggered the approval of the Sabarnes -Oxley Law. The company was a communications company that had risen to profitability during the 1990s. However, the company found its profitability had slowly declined in the early 2000s. This is the largest accounting scandal in history. The officers of WorldCom entered tried to window dress their stock market price. The companys stock market price had decreased because company profits started to decline. The officers, specifically CEO Bernie Ebbers and CPA Scott Sullivan had to prepare false financial statements indicating that their sale and profits were higher than the real sales and profits would show in order to stave the decline of its stock market share price Zekany, Braun, and Warder 2004). Similar to Enron, the companys external auditor, Arthur Andersen, did not comply with generally accepted auditing standards to prevent or curtail material misstatements of the income statement a nd the corresponding balance sheet. The WorldCom fraudulent activities occurred from 1999 to 2002 (Ettredge et al., 1).