Detecting Illegal Acts Flashcards
What are auditors responsibilities to detect illegal acts?
The auditors OBJECTIVE are to:
- Obtain sufficient appropriate audit evidence regarding material amounts and disclosures about laws and regulations generally recognized to have a direct effect on the F/S
- Perform specified audit procedures that may identify instances of noncompliance with other laws and regulations
What are the auditors basic responsibilities during planning?
Design audit to provide reasonable assurance to detect illegal acts that having a direct and material effect on the F/S
During the audit, what is the auditors responsibility to detect illegal acts?
1) Make inquires of management to applicable laws and regulations- Should be documented and in management representation letter
2) Maintain professional skepticism
SAS has two categories of considerations for detecting illegal acts?
1) Direct effect- laws and regs having a direct effect on the amounts/disclosures in the F/S. The auditor should obtain sufficient evidence regarding material amounts and disclosures.
2) Not having a direct effect- The auditor should perform specified audit procedures that may identify noncompliance that may have a material effect on the F/S and inspect correspondence with regulatory authorities
What should you do if there is noncompliance?
1) Gather additional evidence to ascertain the facts
2) Discuss with appropriate level of management
3) Consider consulting with auditors attorney as necessary for any legal determinations
4) Evaluation the implications to other audit areas
5) Report those charged with governance (unless inconsequential)
Consider possible effects on the auditors report:
- If material effect has not been adjusted- issue a qualified or adverse opinion
- if you’re unable to obtain sufficient appropriate audit evidence- issue a qualified or disclaimer of opinion
Do you inform authorities?
Communication would be internal not external. The auditor would have the obligation to report to outside authorities
