Standards

Question 1

SAS 99

Answer 1

Did not change auditor’s responsibility.

Established standards and provides guidance.

Required brainstorming session.

9 Sections
1. Nature & characteristics of fraud.
2. Requisite documentations.
3. Guidance on communication.
4-9. Specific requirements applicable to a particular audit engagement.

In appendix A, over 60 examples of fraud risk factors.

Question 2

SAP 1 - Extensions of Auditing Procedure

Answer 2

Late 1930s

Defalcations exist.

Question 3

SAP 30 - Responsibilities & Functions of the Independent Auditor in the Examination of Financial Statements

Answer 3

Unresponsive to user concerns because it added no new responsibility to detect fraud.

Auditor should be aware of the possibility that fraud may exist.

Clarified that an auditor held no responsibility beyond the minimum duty to design tests that would detect fraud.

Equity funding case determined SAP 30 was inadequate, and there was an “expectation gap”.

Question 4

SAS 16 - The Independent Auditors Responsibility for the Detection of Errors or Irregularities

Answer 4

1977

Required auditors to search for fraud, but didn’t require them to detect fraud.

Form an opinion and plan the examination to search for material errors and Irregularities.

Question 5

SAS 53 - The Auditors Responsibility to Detect & Report Errors & Irregularities

Answer 5

Strengthen the auditors responsibility relating to the detection of instances of material fraudulent financial reporting.

Design the audit to provide “reasonable assurance” of detecting errors & Irregularities.

Question 6

SAS 82 - Consideration of Fraud in a Financial Statement Audit

Answer 6

1997

Written to help reduce the expectation gap.

Only successful if auditors detect more fraud sooner, or convinced financial statement users that auditors should not be held liable/responsible for detecting all financial statement fraud.

First ever auditing standard to address the word “fraud”.

Auditors responsibilities extend throughout the entire audit (not just planning phase)

Document how they assess risk of fraud, how they respond to risks of fraud, and maintain professional skepticism.

Ask management about risk of fraud.