SAS 122, AU 240, Consideration of Fraud In A Financial Statement Audit
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This presentation is an overview of SAS 122, AU 240 which outlines the external auditor’s responsibility to detect material fraud. Although the external auditor is responsible for the detection of anything that may cause a material misstatement of the financial statement whether cause by error or fraud, as reported in the ACFE’s 2018 Report To The Nations on Occupational Fraud and Abuse, only 4% of all financial statement frauds are discovered by the external auditor. The standard requires that the auditor document on every financial statement audit the procedures the implemented in order to detect any material fraud. The purpose of this presentation is to familiarize the participants with an external auditor’s responsibilities under the above provisions.
- Recognize the external auditor’s responsibility to detect material fraud
- Describe the concept of materiality
- Designing effective audit procedures to detect fraud based on risks
- Evaluating internal controls on every audit in order to determine where the risks of material misstatements may be
- Documentation, documentation, documentation
- Planning the audit; when it begins and ends
- Reaction to the discovery of fraud