Statement on Auditing Standards, Consideration of Fraud in a Financial Statement Audit (Redrafted)

1. The SAS

a) Supersedes SAS No. 99, Consideration of Fraud in a Financial Statement Audit (AICPA, Professional Standards, vol. 1, AU sec. 316).

b) Redrafting of SAS No. 99 to apply the ASB’s clarity drafting conventions and to converge with International Standards on Auditing (ISAs).

c) Convergence – Drafted using ISA 240 (Redrafted), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, as a base.

d) Differences between SAS No. 99 and ISA 240 (Redrafted) for which the ASB believes no compelling reason to be different exists have been eliminated.

e) The ASB made various changes to the language of the ISA during the drafting process to use terms or phrases that are more commonly used in the United States, and to tailor examples and guidance to the U.S. environment. The ASB believes that such changes will not create differences between the application of ISA 240 and the application of the SAS.

2. Effective Date – Effective for audits of financial statements for periods ending on or after December 15, 2012.

3. Changes from Existing Standards

a) Does not change or expand SAS No. 99 in any significant respect.

b) To reflect a more principles-based approach to standard setting, certain requirements that are duplicative of broader requirements in SAS No. 99 have been moved to application and other explanatory material, consistent with ISA 240 (Redrafted). The ASB’s view is that this has not changed the overall effectiveness of the proposed SAS.

4. Additions to the SAS

a) The Clarity Project of the ASB has added some sections to the redrafted SAS’s. In this case Objectives are added. Objectives refer to the objectives of the auditor. In this proposed SAS Objectives are to:

(1) identify and assess the risks of material misstatement of the financial statements due to fraud;

(2) obtain sufficient appropriate audit evidence about the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses;

(3) respond appropriately to identified or suspected fraud.