The Auditing Standards Board of the AICPA has issued SAS No. 99, Consideration of Fraud in a Financial Statement Audit, that gives U.S. auditors increased responsibility for detecting material fraud.
“While many reforms have been focused on public companies that have to file with the SEC, this Standard affects how the auditor conducts audits of any company, and encourages an expansion in consciousness of this issue throughout the audit,” says Michael Stevens, editor in chief of Practical Accountant.
This Statement establishes standards and provides guidance to auditors in fulfilling that responsibility, as it relates to fraud, in an audit of financial statements conducted in accordance with generally accepted auditing standards.
Key provisions include an increased emphasis on professional skepticism with an ongoing exchange of ideas among members of the audit team as to how frauds could occur. There should also be discussions with management and others in the organization as to risk of fraud and whether they are aware of any frauds. During an audit, the audit team should design tests that would be unpredictable and unexpected by the client. The Standard also includes procedures to test for management override of controls.
SAS No. 99 supersedes SAS No. 82 which had the same title. It is effective for audits of financial statements for periods beginning on or after December 15, 2002 with earlier implementation permissible.