Sas 99

In: Business and Management

Submitted By rendef
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SAS 99 AND ITS CHALLENGES TO THE ACCOUNTING PROFESSION
Submitted by: Ronneil I. Capones
Consideration of Fraud in a Financial Statement Audit, also known as Statement on Auditing Standard 99 was issued in November 2002. It is a revision to improve the deficiencies of SAS 82 with regards to audit process and quality (Marczewski and Akers, 2005, p. 38). The revision of SAS 82 was started prior to the huge accounting scandals that shook public confidence in the reliability of audits. Nevertheless, it gave the accounting profession more focus on tackling the issues of fraud detection on audits
Three key fraud risk factors are classified and described in SAS 99; incentive/pressure to perpetrate fraud, opportunity to carry out the fraud, and attitude/ability to rationalize the fraudulent action. Incentives or pressure to perpetrate fraud may arise from the threat of losing profitability as a result of failures in the industry, declining product demand, frequent negative cash flows from operations, threat of losing job because of pressure from management to meet analysts’ expectations are a few examples (Casabona and Grego, 2003, p. 17). Opportunities to carry out fraud are characterized by the following conditions; abundance of transactions with related parties not within the normal course of business, unusual complex transactions coupled with subjective judgments, ineffective monitoring by management, board of directors, and audit committee (Casabona and Grego, 2003, p.17). Ability to rationalize fraudulent acts may exist when: management does not set the example in ethical business practices, management’s over obsessiveness when it comes to its stock price and growth rates, lack of checks and balances that detect and control internal shortcomings (Casabona and Grego, 2003, p. 17).
SAS 99 addresses the key fraud risk factors by strengthening existing techniques…...

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