Financial Statements & Ethics Assignment Example | Topics and Well Written Essays - 500 words

Financial Statements & Ethics - Assignment Example The Securities and Exchange Commission (SEC) in alliance with the United States Congress in 2002 created the Sarbanes Oxley Act (SOX). Starbucks Cafà © hired an external auditing firm to perform an independent audit of its 2010 financial statements. The Sarbanes Oxley Act mandates that all public firms hire an accounting firm to audit its annual financial statements. There are many bylaws of the Sarbanes-Oxley Act that ensure auditor independence is followed. Section 201 of the Act prohibits auditors to perform other non-audit services on clients the company audited (Findlaw). The Sarbanes-Oxley Act also created the Public Company Accounting Oversight Board (PCAOB). All public accounting firms performing auditing work must be registered with the PCAOB. On November 2, 2010 the accounting firm Deloitte & Touche performed the Independent Auditor Report of the financial statements of Starbucks for fiscal year 2010. The findings from the audit were that the consolidated financial statements present fairly, in all material aspects, the financial position of Starbucks Corporation and its subsidiaries as of October 3, 201 0 and September 27, 2009 (Annual Report: Starbucks, 2010). My opinion is that contracting the services of outside firms for auditing and fraud detection services is a sound managerial practice. Based on SOX it is mandatory for public firms to hire external accounting firms to perform annual independent audits. The use of external consultants to prevent fraud can increase the efficiency of a system. The external consultants will look at the company from a fresh perspective. An employee might be closed minded and biased and may miss things due to overconfidence and carelessness. One of the cons of the use of external auditors and consultants is that they can very expensive. Consultants can not monitor the daily activities of a firm otherwise they would become full-time employees. There is a need to create internal controls to prevent fraud. These