Most Illegal Acts Affect Financial Statements

Overall effect. Asked about the likely impact of SAS No. 82, Liotta called it an “operational document”. If done correctly, he said, it is “likely that fraudulent financial reports will be identified – if they exist.” Liotta believes SAS No. 82 will increase the sensitivity of external auditors and inspire them to “dig deeper.” It advises CFOs, comptrollers and chief internal auditors to obtain copies of SAS Standard No. 82, familiarize themselves with the regulations, and determine how their companies` risk assessment processes should be changed. EVALUATION OF AUDIT TEST RESULTS Assessing the risk of material misrepresentation due to fraud is a cumulative process that continues throughout the audit. At the end of the audit, the statutory auditor shall consider whether the cumulative results of the audit procedures and other observations, such as: other conditions referred to in paragraph 25 which affect the assessment of fraud risk carried out in the planning of the audit. This may indicate whether additional examination procedures need to be performed. [1] This statement reflects the views of the staff of the Office of the Chief Accountant (“OCA”).

It is not a rule, regulation or statement of the Securities and Exchange Commission (“SEC” or the “Commission”). The Commission neither approved nor rejected the content. This declaration, like all staff declarations, has no legal force or effect: it does not modify or supplement the applicable law and does not create any new or additional obligations for anyone. “Our” and “we” are used in this statement to refer to ACCA employees. Liotta considers paragraph 24 of SAS No. 82 as an extension of paragraph 13, but in more detail. If a company has established a fraud deterrence and detection program, the auditor may or may not examine its effectiveness. However, the auditor should still interview staff monitoring the program to determine whether they have identified any risk factors for fraud.

Liotta said organizations have many deterrence and fraud detection programs in place — internal audit services, ethics hotlines and security services. “People who complete these programs need to understand that they are being asked questions about what they find in their work.” And, Liotta said, they will likely have to give an assessment of the overall impact of what they find on the financial statements and make a presentation to auditors. “It won`t bring them more work,” he said, “but it will allow some of them — perhaps for the first time — to talk to accountants.” RE-EVALUATION SAS-No. 82 was an important initiative of the CNA to provide improved operational guidance on the inclusion of fraud in an audit by the statutory auditor. Once the SAS has been in action for two busy seasons, the NAC will assess the extent to which it has achieved its objectives and determine further action to be taken. This feedback process can also help identify specific questions for further research on deterrence and fraud detection. The PCAOB`s auditing standards for assessing the auditor and responding to risks include requirements for identifying and responding to fraud risks and assessing audit results. [28] These standards include questioning when discussing the possibility of material misrepresentation due to fraud among key engagement team members and require auditors to set aside any previous beliefs about honesty and integrity of management. [29] Some practitioners have questioned the responsibility of auditors to detect certain significant counterfeits, for example in a retail business, where theft is reflected in the cost of goods sold after inventories have been adjusted to actual quantities. While the answer depends on the actual facts and circumstances, many believe that the auditor should have an idea of when the decline in inventories does not match that of other companies in the industry. While some argue that the amount attributed to an infringement should appear on a line labeled “theft costs,” there is no such requirement under GAAP. The auditor also obtains written statements from management regarding the absence of breaches or potential violations of laws or regulations, the effects of which should be taken into account when disclosed in the financial statements or as a basis for accounting for a claim.

(See AS 2805, Management Statements.) The auditor does not need to carry out further procedures in this area if there is no concrete information about possible illegal activities. [14] Statutory auditors should carry out substantive procedures, including unit audits, in case of significant risks. See PCAOB AS 2301, The Auditor`s Responses to the Risks of Material False Statement, paragraph .11. For example, a review of details may include a review of evidence of the amounts and disclosures in the financial statements on a sample basis. The PCAOB standards require audit firms to put in place a quality control system[26] which, if designed and implemented effectively, can encourage and strengthen the application of professional professional professional skepticism in the face of these and other burdens. For example, it is essential to set the right tone for senior management and human resource management policies that emphasize the right staff with the necessary skills to help auditors think critically, among other things. It is important to note that a strong tone at the top of the audit firm[27] that supports and encourages the auditor`s attention to his or her responsibility to identify and respond to fraud risks is essential to establish the technically sceptical mindset that auditors need to fulfil their professional responsibilities in detecting material misrepresentations resulting from fraud. 1 For the purposes of this Standard, an audit committee is defined as a committee (or equivalent) established by and within an entity`s board of directors to oversee the entity`s accounting and financial reporting processes and the audit of the entity`s financial statements; In the absence of such a committee with respect to the Corporation, the entire Board of Directors of the Corporation.

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