Statement of Auditing Standards 99

SAS No. 99 provides standards and guidelines to external auditors in performing their duty towards fraud in the audit of an organization. SAS No. 99 explains fraud as an intentional activity, which leads to material misstatements in the financial statements. The standard recognizes two categories of fraud, these are misstatements due to fraudulent account recording, such as, falsifying financial books; and misstatements due to misappropriation of the firm’s assets, such as stealing assets.

SAS No. 99 requires the engagement team to approach the audit with professional skepticism and a sober mind and not to over-rely on the client’s representations and biases. Hence the auditor should not consider past engagements and is required to remain focused throughout the process. The new standard says that the engagement team should be ready to take a more serious, skeptical attitude when doing their work, especially at the time of drawing the audit plan and assessing the audit facts (Wittington & Pany 210).

The new standard requires the auditors to engage in brainstorming sessions to consult on the eminence for material misstatements in the financial statements resulting from fraud committed prior to and at the time of the audit planning. SAS No. 99 explains that the core objective of brainstorming is to gather ideas on how fraud could be perpetrated and covered up in the firm by employees or the management and how to respond to cases of fraud arising. However, brainstorming should be conducted with a duty of care expected of the auditors. The new standard also expects that the engagement team members consult throughout the exercise about the seriousness of material misstatements as a result of fraud. This new requirement, brainstorming, is a problem to implement in many entities, consultants and business owners say that the brainstorming sessions fade soon after they are implemented and do not continue in the whole audit process (Consideration of Fraud in a Financial Statement Audit 198).

The standard requires the engagement team to make inquiries to the management about its consciousness and perceptions toward fraud. According to the outcome of the analysis done in the audit planning, the auditors can enlighten the management on antifraud programs and measures it can take to prevent and identify fraud, for instance, enabling an ethical culture; enacting non-fraud programs and measures; and coming up with an efficient program oversight process.

SAS No. 99 requires that when auditors are collecting information about the client and its environment, they should assess whether the information shows that either a fraud risk factor was considered. The new standard includes other documentation requirements not in the older standard: how brainstorming sessions were conducted; procedures used to assess fraud risk; how the fraud was communicated to those concerned; and outcome of the procedures done to respond to the risk of management overriding controls.

The new standard explains that auditors should determine fraud risks by performing audit tests. And also an effective synthesis is supposed to be done on the ascertained risks to assess whether the entity is susceptible to material misstatements as a result of fraud, the kind of potential frauds, and how these frauds can be covered up.

Michael Ramos observes that the main problem with SAS No. 99 according to consultants and business owners is that many practices are proposed instead of required. For example, it is proposed that auditors could consider sudden procedures, although logically, this makes it easier to perpetrate fraud. Also, the new standard fails to bridge the expectation gap. The guidelines and requirements made in the standard widen the expectations on the audit field. Thus, the engagement team ought to put into consideration the requirements of the new standard as the only expected work is to detect fraud. They should be ready to provide answers for decisions taken not to implement only one of the required procedures highlighted in the standard.

Works Cited

Consideration of Fraud in a Financial Statement Audit. SAS No. 99; SAS No. 113, (2002): 167-218. Print.

Michael, Ramos. “Auditors’ responsibility for fraud detection: SAS no. 99 introduces a new era in auditors’ requirements.” Journal of Accountancy, 2003. Web.

Wittington, Ray & Pany, Kurt. Principles of auditing and other assurance services, 17th edition. New York: McGraw – Hill Publishers, 2009. Print.

How to Cite This?

Choose the style

Reference

NerdyRoo. (2022, March 18). Statement of Auditing Standards 99. Retrieved from https://nerdyroo.com/statement-of-auditing-standards-99/

Work Cited

"Statement of Auditing Standards 99." NerdyRoo, 18 Mar. 2022, nerdyroo.com/statement-of-auditing-standards-99/.

1. NerdyRoo. "Statement of Auditing Standards 99." March 18, 2022. https://nerdyroo.com/statement-of-auditing-standards-99/.


Bibliography


NerdyRoo. "Statement of Auditing Standards 99." March 18, 2022. https://nerdyroo.com/statement-of-auditing-standards-99/.

References

NerdyRoo. 2022. "Statement of Auditing Standards 99." March 18, 2022. https://nerdyroo.com/statement-of-auditing-standards-99/.

References

NerdyRoo. (2022) 'Statement of Auditing Standards 99'. 18 March.

Copy this

One of the best students granted us this essay, so that we share it with you. If the paper can be helpful for your studies, feel free to use it but don’t forget to cite it correctly.

Are you the author of this work? Did you change your mind and wish it to be deleted from NerdyRoo? Contact us here.