External Audit Analysis

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Newham is in the cosmetic manufacturing business with competitors being Revlon and Avon products. This is a highly competitive industry with many different players in the industry, both large and small companies. The industry is regulated in the United States by the Food and Drug Administration (FDA), however in the past the FDA has had limited power to regulate cosmetics. “Concerned about generation old regulations that have left it with little power to ensure the safety of thousands of consumer products from shampoos to shaving cream, the Food and Drug Administration launched talks with the cosmetic industry more than a year ago.” (Dennis, 2014) this goes to show how the regulatory environment could be changing in the future for Newham and …show more content…
“The understanding of internal controls required of CPAs to express an opinion on financial statements is not adequate for them to offer an opinion on the controls themselves. This will mean auditors have to make changes to their audit process” (McConnell, Banks, 2003) in addition to having implications on the process that auditors have to follow Sarbanes-Oxley Oxley section 201 sets out that there are certain activities that the external auditors cannot perform promises to aid in the separation of the external auditors in the work that they are reviewing. “Prohibited activities… To provide to the issuer, contemporary mania sleep with audit any non-audit services including – (1) bookkeeping or other service related to the accounting records or financial statements of the audit client; (2) financial information systems design and implementations ;(3) appraisal or valuation services fairness opinions or contributions and kind reports…” (Sarbanes- Oxley, § 201 (g &H)) this is just a short excerpt showing the increased requirements for separation of the independent auditors. In addition to this Sarbanes-Oxley also created the PC AOB. “The act mandated a number of reforms to enhance corporate responsibility, enhance financial …show more content…
“Recently, there has been a change in executive management, including the CEO and CFO. The change was sparked by questionable bonus payments that were paid to executive management team based on the company’s performance. In addition a recent lawsuit has been filed on claims that a new product is not properly advertised, leading many customers to experience allergic reactions.”( Acc 7000 Milestone two Guildelines and Rubric) the changes in executive management are concerning due to the tie with questionable executive bonuses. This is similar to some of the things that related to Enron and the creation of Sarbanes-Oxley. The bonuses for Newham were based on performance of the company, will want to again make sure we spend some time examining sales and revenue to make sure that they are accurately and fairly

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