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In October 2002, the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) issued Statement on Auditing Standard (SAS) No. 99, Consideration of Fraud in a Financial Statement Audit, a revision of SAS No. 82. The purpose of this new standard is to enhance the auditor's effectiveness in addressing fraud in a financial statement audit. The objectives of this paper are to explain the major requirements of SAS No. 99 and to discuss its impact on financial statement audits.
Introduction
Much attention has recently been focused on both the fraud committed by business executives (who have the primary responsibility for their company's financial statements) and on the public accounting firms who failed to detect and report the fraud. Because these fraudulent activities have occurred in some of the largest companies in the United States, they have caused a loss of public confidence in audited financial statements, and have created the need to reconsider the procedures performed to uncover fraud in current and future financial statement audits. To meet this need and to serve as the cornerstone of its anti-fraud program, the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA) issued Statement on Auditing Standard (SAS) No. 99, Consideration of Fraud in a Financial Statement Audit, which supersedes SAS No. 82 (which has the same title). SAS No. 99 enhances the accounting profession's most decisive steps in combating fraud. Although the auditor's responsibility for detecting fraud has not changed from SAS 82, the new standard provides more guidance on how the auditor should plan and perform the audit to obtain reasonable assurance about whether or not the financial statements contain material misstatements because of errors or fraud. The objectives of this paper are to explain the major requirements of SAS No. 99, and to discuss its impact on financial statement audits.
Background
The ASB issued SAS No. 82 in 1997. It provided guidance on the consideration of material fraud in a financial statement audit That same year, the ASB commissioned research on SAS 82, to study the impact of the standard on practice to determine if further modifications and enhancements were necessary. In August 2000, the Panel on Audit Effectiveness, appointed by the Public Oversight...