OtherPapers.com - Other Term Papers and Free Essays

Omm 622 - What to Expect in an Audit

Essay by   •  March 13, 2018  •  Essay  •  1,012 Words (5 Pages)  •  466 Views

Essay Preview: Omm 622 - What to Expect in an Audit

Report this essay
Page 1 of 5

What to Expect in an Audit

Diane Campbell

OMM 622

Financial Decision Making

Martin Cain

December 11, 2017

        One of the things that many new accountants and new managers can feel some concern about is the first audit. One of the main reasons for this is that it is unknown territory. However, it seems that the auditor can cause some consternation in a manager who has been with the company for a long time. Many people dread audits, feeling that they are intrusive and in some ways demeaning. However, audits prove that what a company has reported is actually as it is reported. A good audit provides information about the financial documents and the management of a company, most often offering provenance of the ability of the management and staff. In addition, an audit provides proof that a company is operating honestly and within the governmental requirements. Brenda A. Porter (2009) best stated it, “As society’s norms change over time, and as business enterprises grow in size and extend their power and influence in society, so changes occur in the extent of the accountability required of their managers.” (Porter, 2009)

        Many people dread an audit. In most cases this is simply because of the time that is required to provide the necessary documents needed to complete the audit. The term audit by definition means: “a formal examination of an organization’s or individual’s accounts or financial situation.” (Merriam-Webster, n. d.) It is possible that an audit is seen as a test in school, and thus the dread that so many people have. While there were rules and regulations in place under the Generally Accepted Accounting Principles (GAAP) it became too easy to get around those rules. There are several things that an audit sets out to do, some of which came about because of the Sarbanes-Oxley Act (SOX, 2002). Kizirian, Mayhew and Sneathen in their paper, The Impact of Management Integrity on Audit Planning and Evidence (2005) stated, “Finally, the recent enactment of the Sarbanes-Oxley Act (U. S. House of Representatives, 2002) specially section 404, requires that auditors evaluate and report on the client internal controls, including management integrity. This requirement will increase the amount of information available to auditors making evidential planning decisions. Auditors, therefore, need to understand the linkages between management integrity, audit risk, and evidence. (Pg. 50, Para. 3)

One of the things that an audit can do is find where misinformation in inventory caused a discrepancy in the financial statements. For example, it might be nothing of importance to the employee who may have miscounted the inventory, but it could be the difference between the company being seen as less than truthful. It is because of unintentional errors, and specifically deliberately hidden items and issues that auditing became what it is today. In fact, the Sarbanes-Oxley act came into being to prevent issues such as those of Enron. The Sarbanes-Oxley act (SOX) of 2002 is also known as the Public Company Accounting Reform and Investor Protection Act, sets new or enhanced standards for external reporting. (Epstein, 2014) It “also requires that public companies with market capitalizations of $75 million or more include an attestation report of their independent auditors on the effectiveness of the company’s internal controls over financial reporting. This requirement has become part of the audit process.” (Epstein, 2014, Chap. 5.4, Para. 4)



Download as:   txt (6.1 Kb)   pdf (85.4 Kb)   docx (10.6 Kb)  
Continue for 4 more pages »
Only available on OtherPapers.com
Citation Generator

(2018, 03). Omm 622 - What to Expect in an Audit. OtherPapers.com. Retrieved 03, 2018, from https://www.otherpapers.com/essay/Omm-622-What-to-Expect-in-an/63652.html

"Omm 622 - What to Expect in an Audit" OtherPapers.com. 03 2018. 2018. 03 2018 <https://www.otherpapers.com/essay/Omm-622-What-to-Expect-in-an/63652.html>.

"Omm 622 - What to Expect in an Audit." OtherPapers.com. OtherPapers.com, 03 2018. Web. 03 2018. <https://www.otherpapers.com/essay/Omm-622-What-to-Expect-in-an/63652.html>.

"Omm 622 - What to Expect in an Audit." OtherPapers.com. 03, 2018. Accessed 03, 2018. https://www.otherpapers.com/essay/Omm-622-What-to-Expect-in-an/63652.html.