Auditing a Publicly Traded Company

Auditing a Publicly Traded Company

During the audit of the assigned company, Staff I will completely explore a number of issues. To start with, we will provide a description of generally accepted accounting principles (GAAP) are and its importance as well as what we will look for to see if our client is consistent with the GAAP. Our focal point will be the accounting treatment of share-based payment and accounting consolidation theory as it relates to special purpose entities.

GAAP

GAAP are a combination of authoritative standards by which accounting should be performed because it allows us as auditors and other financial statement users to make accurate statements about a company’s financial statements. By following GAAP, auditors create consistency, relevance, reliability, and comparability among companies; therefore, companies can compare their financials to their competitors and other businesses in the market who use GAAP (Learnthat, 2005).

Consistency with the GAAP

It is important that every company adhere to the guidelines set forth in GAAP. Auditing is a way that we can confirm that a company is consistent with GAAP. For this company, I would like to start by doing a horizontal analysis, see if there are any big changes, or areas of no change that should reflect change under new GAAP procedures. Also, a vertical analysis may prove helpful in confirming this. Furthermore, we will be looking for specific documentation regarding share-based reporting and SPE.

Share-based Payment Reporting

A share-based payment arrangement is an arrangement that meets one of the following conditions:

a. An entity offers one or several suppliers of goods and services with equity instruments, for example, rewards of equity shares and equity share options.

b. An entity sustains liabilities to suppliers that satisfy one of the next two conditions:

1. The quantity is fully or at least partially derived from the price of the entity’s equity...