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

Audit framework - Essay Examplethe statutory audit report is a must for the federation in the presentation of their balance sheet, income statement and statement of currency flows.The standard statutory audit is characterised by an auditor performs normal auditing procedures to show that the financial statements are more(prenominal) credible than if no external auditors opinion is attached. The statutory audit is implemented in order to go along frauds and illegal acts.As proof,Enrons income statement was windowpane dressed. The company had recorded sales transactions that had never happened. Consequently, these double-faced 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 stockholders 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 o ff -shore companies. 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 fictive sales and profits would increase stockholder investments. Enron and Arthur Andersen knew that recording fictitious sales and profits would increase stockholder investments. Enron and Arthur Andersen knew that recording fictitious sales and profits would increase stockholder investments. The senior management officers connived with the score officers of Enron to neaten the fraud -laden financial statement in complete violation the harmonization standards set by violating the external accounting standards accomplish 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 E nron 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 equipment casualty. 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 real misstatements of the income st atement and the corresponding balance sheet. The WorldCom fraudulent activities occurred from 1999 to 2002 (Ettredge et al., 1).