The new standard, titled ‘Statement on Auditing Standards (SAS) 99: Consideration of Fraud in Financial Statement Audit,’ is the first step in a multi-step program to reduce fraud. Auditors now have clarity in what is considered fraud.
This is supposed to help clear up financial statements and help restore confidence in corporate financials.
Intended to put fraud at the front of an auditor’s mind, the new standard provides for:
- Audit teams exchanging ideas of how frauds occur. These discussions should better equip an audit team with tests responsive to the risks of fraud.
- Audit teams meeting with management and discussing possible frauds. Auditors will also be encouraged to ask outside of management to give other employees the opportunity to “blow the whistle.”
- Audit teams testing those areas, which normally would not be tested.
- Procedures to test for management override of controls in every audit.
SAS 99 is effective for audits of financial statements beginning on or before December 15, 2002, although firms are urged to begin implementation earlier.
The AICPA, with more than 330,000 members, sets US auditing and professional ethical standards. With the Financial Accounting Standards Board, it sets US accounting standards.