Final answer:
The external audit of Sun Enterprises encompasses assessing the company's financial statements, evaluating internal controls, identifying fraud, and possibly providing process improvement recommendations. Audits are part of corporate governance meant to maintain investor trust but have failed in the past, necessitating laws like Sarbanes-Oxley.
Step-by-step explanation:
The purpose of the external audit of Sun Enterprises is primarily to assess the financial statements of the company to ensure they provide a true and fair view of the company's financial performance and position. Additionally, auditors evaluate the company's internal controls and compliance with applicable laws and regulations. They also play a crucial role in identifying any potential fraud or mismanagement. Although not a primary objective, providing recommendations for improving business processes may also be an outcome of the audit findings, promoting good corporate governance.
Corporate governance is critical for maintaining investor confidence and includes several key institutions. The board of directors is the first line of oversight for executives, while auditing firms review financial records to authenticate their accuracy. Outside investors, especially significant shareholders, influence governance through their investment decisions. However, past events like the Lehman Brothers scandal and other major accounting scandals have demonstrated that corporate governance can fail, which led to the creation of the Sarbanes-Oxley Act intended to protect investors.