The Sunbeam Corporation file bankruptcy in 1998, what are three substantive concepts that an auditor can...

The Sunbeam Corporation file bankruptcy in 1998, what are three substantive concepts that an auditor can learn from their mistakes.

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Answer: Growing number of frauds related to the financial statements has been a deep concern at SEC. Technically why auditors have failed in finding these frauds is very difficult to ascertain. Normally GAAP principles of accounting should have eliminated such possibility but again these accounting standard practices are more of a guideline and are subject to interpretation by the auditors and company. The following three substantive concepts that an auditor can learn from their mistakes.

Collect substantial and sufficient audit evidence, only meeting the criteria of the GAAP is not enough.
Application of GAAP pronouncements correctly and the audit program should be designed in a way it not only meet the requirements of the GAAP rather it also makes the pronouncement of GAAP by design.
Revenue recognition, related party transactions need to be analyzed with a suitable analytical audit model.

keosha answered 9 months ago

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