Consideration of Fraud in a Financial Statement Audit
AU Section 316
Source: SAS No. 99; SAS No. 113.
Introduction and Overview
Description and Characteristics of Fraud
The Importance of Exercising Professional Skepticism
Discussion Among Engagement Personnel Regarding the RoMM Due to Fraud
Obtaining the Information Needed to Identify the RoMM Due to Fraud
Making Inquiries of Management and Others Within the Entity About the Risks of Fraud
Considering the Results of Analytical Procedures Performed in Planning the Audit
Considering Fraud Risks
Considering Other Information That May Be Helpful in Identifying Risks of Material
Misstatement Due to Fraud
Identifying Risks That May Result in a Material Misstatement Due to Fraud
Using the Information Gathered to Identify Risk of Material Misstatements Due to Fraud
A Presumption That Improper Revenue Recognition Is a Fraud Risk
A Consideration of the Risk of Management Override of Controls
Assessing the Identified Risks After Taking Into Account an Evaluation of the Entity’s
Programs and Controls That Address the Risks
Responding to the Results of the Assessment
Overall Responses to the Risk of Material Misstatement
Responses Involving the Nature, Timing, and Extent of Procedures to Be Performed to
Address the Identified Risks
Additional Examples of Responses to Identified Risks of Misstatements Arising
From Fraudulent Financial Reporting
Examples of Responses to Identified Risks of Misstatements Arising From
Misappropriations of Assets
Responses to Further Address the Risk of Management Override of Controls
.58 Examining journal entries and other adjustments for evidence of possible
material misstatement due to fraud.
.63 Reviewing accounting estimates for biases that could result in material
misstatement due to fraud.
.66 Evaluating the business rationale for significant unusual transactions.
Evaluating Audit Evidence
.68 Assessing risks of material misstatement due to fraud throughout the audit.
.69 Evaluating whether analytical procedures performed as substantive tests or in
the overall review stage of the audit indicate a previously unrecognized risk of
material misstatement due to fraud.
.74 Evaluating the risks of material misstatement due to fraud at or near the date of
the auditor’s report.
.75 Responding to misstatements that may be the result of fraud.
Communicating About Possible Fraud to Management, Those Charged With Governance,
and Others
Documenting the Auditor’s Consideration of Fraud
Effective Date
Appendix Examples of Fraud Risk Factors
Risk Factors Relating to Misstatements Arising From Fraudulent Financial
Reporting
Incentives/Pressures
Opportunities
Attitudes/Rationalizations
Risk Factors Relating to Misstatements Arising From Misappropriation of Assets
Incentives/Pressures
Opportunities
Attitudes/Rationalizations
Exhibit
Management Antifraud Programs and Controls Guidance to Help Prevent, Deter, and
Detect Fraud
Preface
Introduction
Creating a Culture of Honesty and High Ethics
Setting the Tone at the Top
Creating a Positive Workplace Environment
Hiring and Promoting Appropriate Employees
Training
Confirmation
Discipline
Evaluating Antifraud Processes and Controls
Identifying and Measuring Fraud Risks
Mitigating Fraud Risks
Implementing and Monitoring Appropriate Internal Controls
Developing an Appropriate Oversight Process
Audit Committee or Those Charged With Governance
Management
Internal Auditors
Independent Auditors
Certified Fraud Examiners
Other Information
Attachment 1: AICPA ”CPA’s Handbook of Fraud and Commercial Crime Prevention,” An
Organizational Code of Conduct