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Audit Case Study Sunbeam's Culture

964 Words4 Pages

1. How did pressures for financial performance contribute to Sunbeam’s culture, where quarterly sales were manipulated to influence investors? To what extent do you believe the Andersen auditors should have considered the resulting culture in planning and executing its audit?

Before Chainsaw Al was brought in as CEO at Sunbeam, Sunbeam had already experienced financial distress. Sunbeam was pressured to fix their financial issues, and were looking at all options on how to solve their internal crisis. They brought in Chainsaw Al, who had a reputation of cutting companies to the bone. Sunbeam senior management wanted to, “create the illusion of a successful restructuring of Sunbeam in orderto inflate its stock price and thus improve its value …show more content…

They also help evaluate financial statement information by showing the relationships between financial and nonfinancial data. Auditors can use these procedures and relationships to obtain evidence about the reasonableness of the amounts provided by the client. Substantial changes from the prior year to the current year give the auditor a questioning mind on certain accounts, and makes the auditing process smoother and more efficient.
Auditors could use certain techniques to perform analytical procedures during an audit, such as an analysis of trends and ratios, complex regression modeling of many relationships and data for many years. This could include comparing revenue, expenses, payroll etc. for the current year to prior years. A regression model can estimate the amount of sales for the year using economical and industrial data. An auditor looking at these analytical procedures can identify unexpected differences or the absence of certain …show more content…

Harlow might talk about the pressure that he is facing from management to keep his client, Sunbeam, happy and also gain possible incentives for non-audit services. Audit firms are likely to operate in a competitive environment for audit services and non-audit services, and clients are not likely going to offer more work than usual to the auditors, in order to not portray the company’s side of the

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