Introduction:
An audit is a process of examining the financial statements for accuracy and free of fraud. According to the textbook, Intermediate Accounting by Spiceland chapter one, it said “Audits add credibility to the financial statements, increasing the confidence of those who rely on the information” (page. 16, 2016). After the frauds scandal of WorldCom and other companies, the investors lost their confidence in the accounting department (page.16, 2016). To increase the investors’ confidence one again, Congress created the Sarbanes-Oxley Act of 2002 to prevent future frauds from happening (page. 16, 2016). This act made the audit profession important to society.
Why is Audit important to Public Traded Company?
Audit reports are required …show more content…
According to the article, “What is the Importance of a Company 's Financial Statements?” by Jay Way, he said that “investors and creditors rely on a company’s financial conditions for both the safety and profitability of their investments.”(2007). Investors always want to know which company they should or should not invest in so they would look at the financial statement. A lot of questions investors might think about would be ‘would it be safe to invest in this company?’ and ‘would I be able to get some profit when investing in this company?’ If investors feel it’s unsafe, they will not invest. As for creditors, they would look at the company’s financial statements to decide whether or not to lend them money. When creditors let a company loan from them, they had to think whether or not, the company that is borrowing can pay the loan back or lose their money …show more content…
For example, in a youtube video, Worldcom, uploaded by warmetalgreygalulu, it talked about the fraud that happened at WorldCom (warmetalgreygalulu, 2013). David Myers was forced to take fraudulent actions like capitalizing operating expenses when Scott Sullivan told him that the numbers on the financial statements were wrong (warmetalgreygalulu, 2013). In this case, if David Myers handed the fraudulent version of the financial statement to another auditor of another company, that statement would be a failed
An audit is a process of examining the financial statements for accuracy and free of fraud. According to the textbook, Intermediate Accounting by Spiceland chapter one, it said “Audits add credibility to the financial statements, increasing the confidence of those who rely on the information” (page. 16, 2016). After the frauds scandal of WorldCom and other companies, the investors lost their confidence in the accounting department (page.16, 2016). To increase the investors’ confidence one again, Congress created the Sarbanes-Oxley Act of 2002 to prevent future frauds from happening (page. 16, 2016). This act made the audit profession important to society.
Why is Audit important to Public Traded Company?
Audit reports are required …show more content…
According to the article, “What is the Importance of a Company 's Financial Statements?” by Jay Way, he said that “investors and creditors rely on a company’s financial conditions for both the safety and profitability of their investments.”(2007). Investors always want to know which company they should or should not invest in so they would look at the financial statement. A lot of questions investors might think about would be ‘would it be safe to invest in this company?’ and ‘would I be able to get some profit when investing in this company?’ If investors feel it’s unsafe, they will not invest. As for creditors, they would look at the company’s financial statements to decide whether or not to lend them money. When creditors let a company loan from them, they had to think whether or not, the company that is borrowing can pay the loan back or lose their money …show more content…
For example, in a youtube video, Worldcom, uploaded by warmetalgreygalulu, it talked about the fraud that happened at WorldCom (warmetalgreygalulu, 2013). David Myers was forced to take fraudulent actions like capitalizing operating expenses when Scott Sullivan told him that the numbers on the financial statements were wrong (warmetalgreygalulu, 2013). In this case, if David Myers handed the fraudulent version of the financial statement to another auditor of another company, that statement would be a failed