The purpose of this paper is to explain the nature and functions of auditing, relate them to the audit functions in Enardo, Inc., describe the elements of the Generally Accepted Auditing Standards (GAAS) and how these standards apply to financial, operational, and compliance audits, explain the effect that the Sarbanes-Oxley Act of 2002, and the Public Company Accounting Oversight Board (PCAOB) will have on audits of publicly traded companies, and discuss the additional requirements that are placed on auditors from this Act as well as the actions of the PCAOB.
Auditing is the process by which economic events and processes are evaluated and verified as true and correct. The auditing process consists of gathering, evaluating, and reporting. The auditor gathers information about the entities processes, economic transactions and procedures in an unbiased manner. The information is then evaluated to ensure that it follows GAAP or any other standards that apply.
The auditor then compiles a report of their findings to be submitted to the appropriate parties. These processes are critical to the accurate verification and assurance provided by the auditing professional. The auditing of an entity is valuable information used by the entity itself as well as third parties with an interest in the entity. The validity of an entities financial statements and the accuracy of their internal controls can be very important in decision making processes; therefore, the need for reliable auditing and assurance in these areas is required. Auditing is generally performed by an independent auditor with no ties to the entity being audited. This helps to ensure unbiased opinions.
The internal auditing functions of Enardo, a manufacturing company, are usually performed at the end of every month. The accounting manager compiles all of the information provided by the various departments and submits it to the CFO for...