SAS 99 Summary
The Auditor has the responsibility to plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement whether caused by error or fraud. The Auditor has standards of fieldwork that should be used as a guide to fulfill their responsibility. These standards are covered in SAS 99. Fraud is the intentional act that results in a material misstatement in financial statements that are the subject of an audit. There are two types of misstatements relevant to the consideration of fraud, Misstatements arising from fraudulent financial reporting and misstatements arising from the misappropriation of assets. Fraudulent financial reporting can arise from falsifying or altering …show more content…
Management has a unique ability to perpetrate fraud because it is in a position to directly or indirectly manipulate accounting records and present fraudulent financial information. Management and employees engaged in fraud will take steps to conceal the fraud from the auditors and other within the organization by falsifying documents or concealing through collusion. Concealing the fraud makes the job of the auditor more difficult. To plan for the audit, discussion of the potential for material misstatement due to fraud should occur within the audit team. A Brainstorming discussion involving key members of the audit team should address the susceptibility of the entity to be engaged in fraud keeping a questioning mind. The next step is obtaining information to identify the risk of fraud by questioning management, internal audit, the audit committee, legal department and employees of varying levels of authority about those risks and use professional judgement in considering the answers given. The auditor should also perform analytical procedures to identify unusual transactions or trends and analyze relationships involving revenue accounts to identify fraud risks. The attributes of the risk are, type, significance, likelihood, and pervasiveness of the risk such as improper revenue recognition or managements override of controls. The extent of the risk …show more content…
The team should understand the controls of the entity and plan the proper timing, journal entries and inquiries of individuals involved. The team should also review accounting estimates for biases by comparing current and previous year estimates when available and understand the business rational for the above entries. The next step is evaluating the audit evidence gathered, searching for discrepancies in the accounting records; conflicting or missing audit evidence; problematic or unusual relationships between the auditor and management. Not all misstatements are intentional and therefore are not fraud. Some could be innocent errors. When possible fraud is discovered, communication to management. Fraud can be thwarted if there is a culture of honesty and ethics being passed down from top management creating a positive workplace environment and hiring and promoting appropriate employees. Training of employees letting them know that there will be consequences for their actions, and disciplining those employees who violate the code of ethics, should reduce the risk of
The Auditor has the responsibility to plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement whether caused by error or fraud. The Auditor has standards of fieldwork that should be used as a guide to fulfill their responsibility. These standards are covered in SAS 99. Fraud is the intentional act that results in a material misstatement in financial statements that are the subject of an audit. There are two types of misstatements relevant to the consideration of fraud, Misstatements arising from fraudulent financial reporting and misstatements arising from the misappropriation of assets. Fraudulent financial reporting can arise from falsifying or altering …show more content…
Management has a unique ability to perpetrate fraud because it is in a position to directly or indirectly manipulate accounting records and present fraudulent financial information. Management and employees engaged in fraud will take steps to conceal the fraud from the auditors and other within the organization by falsifying documents or concealing through collusion. Concealing the fraud makes the job of the auditor more difficult. To plan for the audit, discussion of the potential for material misstatement due to fraud should occur within the audit team. A Brainstorming discussion involving key members of the audit team should address the susceptibility of the entity to be engaged in fraud keeping a questioning mind. The next step is obtaining information to identify the risk of fraud by questioning management, internal audit, the audit committee, legal department and employees of varying levels of authority about those risks and use professional judgement in considering the answers given. The auditor should also perform analytical procedures to identify unusual transactions or trends and analyze relationships involving revenue accounts to identify fraud risks. The attributes of the risk are, type, significance, likelihood, and pervasiveness of the risk such as improper revenue recognition or managements override of controls. The extent of the risk …show more content…
The team should understand the controls of the entity and plan the proper timing, journal entries and inquiries of individuals involved. The team should also review accounting estimates for biases by comparing current and previous year estimates when available and understand the business rational for the above entries. The next step is evaluating the audit evidence gathered, searching for discrepancies in the accounting records; conflicting or missing audit evidence; problematic or unusual relationships between the auditor and management. Not all misstatements are intentional and therefore are not fraud. Some could be innocent errors. When possible fraud is discovered, communication to management. Fraud can be thwarted if there is a culture of honesty and ethics being passed down from top management creating a positive workplace environment and hiring and promoting appropriate employees. Training of employees letting them know that there will be consequences for their actions, and disciplining those employees who violate the code of ethics, should reduce the risk of