Auditor’s responsibility for detecting fraud
The current authoritative guidelines on fraud detection are presented in SAS no. 99, consideration of fraud in a financial statement audit, which pertains to the following areas of financial audit:
1. Description and characteristics of fraud
2. Professional skepticism
3. Engagement personnel discussion
4. Obtaining audit evidence and information
5. Identifying risks
6. Assessing the identified risks
7. Responding to the assessment
8. Evaluating audit evidence and information
9. Communicating possible fraud
10. Documenting consideration of fraud
This list demonstrates how the external auditor must now think about fraud during every phase of the audit processes and seamlessly blend the auditor’s consideration of fraud into the audit process.
The auditor is also required to assess the risk factors related to both fraudulent financial reporting and the misappropriation of assets.