provision of SAS 99 that you believe has had the greatest effect on auditor detection of fraud

 1) Identify the provision of SAS 99 that you believe has had the greatest effect on auditor detection of fraud, and explain your position.
It is impossible to eliminate fraud completely, however, steps can be taken that will minimize the effects of fraud if taken in a timely fashion. In order to guide audits, the Auditing Standards Board (ASB) issued the Statement of Auditing
Standards No. 99. The SAS 99 is an auditing statement developed by the Auditing Standards Board, which guide auditors to conduct financial statements audits more competently. The SAS 99 supersedes SAS 82, mainly because of accounting scandals facing the public and private sector during the time of release in 2002. The main difference between SAS 82 and SAS 99 is that the latter requires a brainstorming session involving members of the assessment team. The focus of the brainstorming session is where it is more likely for fraud to occur. It is not the role of auditors to determine whether fraud has legally occurred, however, the auditor plays a paramount role in determining whether material misstatement has occurred. The determination of whether fraud has occurred or it is an instance of an error is whether it was intentional or unintentional. Fraud is usually an intentional action that results in a material misstatement in a financial statement.
The role of an auditor is obtaining evidence that a financial statement is free from material misstatement. Determining whether the material misstatement is intentional or not an auditors role. Determining intent in matters involving accounting statements is often a difficult job. For example, there may be unreasonable estimates in a financial statement because of poor planning capabilities. While attempting to detect fraud, brainstorming is the most effective approach because it enables auditors to plan fraud detection without having to do it alone. Brainstorming reduces the cognitive load on the auditors thus reducing the probability of committing mistakes on the part of the auditors. It also enables the auditors to come up with more creative methods of fraud detection.
There are three main questions that the auditors detect during a brainstorming session for them to come up with more creative ways of detecting fraud through strategic reasoning. The auditors must consider potential frauds that may have occurred. After identifying possible fraud, the auditors must determine possible means that the management and other concerned parties could employ to hide the fraud from detection using the standard auditing procedures. The auditors must then determine how they could reveal the concealed fraud it exist in the financial statement. SAS 99 encourages auditors to deviate from the norm and think of procedures that are less predictable from the managements point of view. This strategic reasoning facilitates the linkage between fraud risk assessment and sound auditing methods. The strategic thinking encourage by brainstorming encourage auditors to be effective even when they are working alone. This is the main difference between SAS 82 and SAS 99. Brainstorming allow the auditor to modify the standard auditing procedures making them less predictable thus offsetting the negative properties of using a standardized program.
2) Of factors that relate to improved audit committee effectiveness, do you believe that auditor selection or evaluation of significant audit reporting decisions has a greater effect on audit quality? Explain your position.
The principal purpose of an audit committee as conceived by the law is the selection of an auditor to conduct an evaluation of a financial audit. However, the audit committee may serve oversight purposes, which may be allocated to the committee by the governing body. it is clear from the role assigned to the audit committee that it does influence the quality of the audit. Among the primary role of the audit committee is monitoring the audit. The interest of the committee as the audit progress include ensuring that activities are on schedule and the auditors can access essential personnel and material necessary for the tasks. The committee also handles irregularities requiring instance responses and ensure only professional opinions are included in the report. This is accomplished through periodic reporting during meetings and written reports.
It the end of an audit, each auditor produces an individual report, which is handed to the audit committee for review. The committee reviews each report thoroughly to understand the problems identified by each auditor. This enables the committee to provide the background needed to solve the problems. For the committee to effectively understand and articulate the problem, the report must be presented to them in a way that is easy to understand. This is achieved by accompanying the written report with a follow up meeting that allows the committee members to question the auditors on issues they do not understand. This improves the committee grasp of the issue, which improves the quality of the audit. In some cases, the meeting between the auditors and the audit committee is followed by another meeting including the two groups and the governing board. During the meeting, the governing board has an opportunity to question the auditors, which ensures that finding of an audit are communicated effectively.
It is the responsibility of the management to implement the recommendations of an auditing report; however, it is the role of the audit committee to monitor the implementation process. The audit committee report directly to the governing body and the management is required to answer to the governing body if the audit committee expresses dissatisfaction. Auditor selection determines the quality of the audit because the use of auditor procurement process as one employed by the audit committee ensures the selection of a competent audit. This ensures that the auditor has the skills and uses adequate force, enough to detect noncompliance and unreasonable business practices. Good communication channels ensure that the auditors finding and resulting recommendations are implemented by the management.
3) Do you believe improved audit committee effectiveness or auditor consideration of fraud has had a greater effect on improving the quality of financial reporting? Explain your position.
The role of an auditor is to determine whether material misstatement has occurred. The role of the audit committee is ensuring only the right auditors are selected for the task and the tasks remain on course. The audit committee ensures the only competent auditors who are up to the task are selected for the task. This ensures that only the highest quality service available to the organization is hired. The role of the auditor is identifying misrepresentation in an organizations financial statement whether it is intentional or not is not the concern of the auditor. Auditor consideration of fraud using brainstorming and strategic thinking ensure high quality results. The SAS 99 recommends a procedure for the evaluation of a financial statement and recommends an addition step where the auditors brainstorms using strategic thinking to discover concealed fraud.
Considering fraud using brainstorming sessions and strategic thinking is very important because if the management is interested in concealing something for an auditor, they are likely to place it in sections of the financial statement that the convectional procedure overlooks. Through brainstorming, the auditors are able to view the financial statement from the management point of view and identify possible sections that could be used to conceal fraud. Auditor consideration of fraud ensures that the auditor maintains professional skepticism, which is very important in the gathering and evaluation of financial statements. Improved audit committee effectiveness ensures not only the selection of competent auditors, but also effective communication amongst the auditors, management, and governing body. Quality financial reporting is a product of a skeptic auditor and an audit committee committed to facilitating the auditors and communicating the finding to the concerned parties.