The Audit Standards Board (ASB) has issued many Statements to improve the detection of fraud in financial statements. SAS \#99 which was issued in October 2002 is an example of one of those statements and reflects the continuing quest by the ASB to improve fraud detection by an attest audit. An outline of \#99 is presented below: - Description and Characteristics of Fraud: - Fraud is an intentional act that results in a material misstatement in financial statements that are subject of an audit. - There are two types of misstatements that are relevant to the auditor's consideration of fraud. - Misstatements arising from fraudulent financial reporting are intentional misstatements or omissions. - Misstatements arising from misappropriation of assets. - Overview of the elements of the Fraud Risk Triangle. - Management has a unique ability to perpetrate fraud. - Fraud is often concealed through collusion. - Analytics may assist in revealing fraud. - The importance of exercising professional skepticism. - Questioning mind. - Critical assessment of audit evidence. - Discussion among engagement personnel regarding the risks of material misstatement due to fraud. (Brainstorming) - Obtaining the information needed to identify the risks of material misstatement due to fraud. - Identifying risks that may result in a material misstatement due to fraud. - Assessing the identified risks after taking into account an evaluation of the entity's programs and controls that address the risk. - Responding to the results of the assessment. - Evaluating audit evidence. NOTE: SAS \#99 is presented to reflect the progress that has been made in improving the quality of audits relative to fraud. You should reflect on SAS \#99 and put it in the context of Equity Funding. An interesting note is that the prefix 99 also represented the coding of the fraud policies at EFLIC. Question 10 EFLIC was shattered on April Fool's Day in 1973 and instantly collapsed. What audit factors allowed the fraud to exist for nearly a decade