auditors have performed procedures to identify or detect fraud during the year

Auditors have performed procedures to identify or

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auditors have performed procedures to identify or detect fraud during the year, and whether manage-ment has satisfactorily responded to the findings resulting from those procedures; and whether internal auditors are aware of instances of man-agement override of controls and the nature and circumstances of such overrides.Inquiries of others within the company (e.g., op-erating personnel not directly involved in the financial reporting process, in-house legal counsel) about their views regarding fraud risks, includ-ing, in particular, whether they have knowledge of fraud, alleged fraud, or suspected fraud. The results of the risk assessment completed during the planning stages of an audit provide the basis for determining the scope of the audit and nature, timing, and extent of the audit tests that will be performed. Audit planning is a continuous process, however, and the audit scope might be adjusted during the course of the audit based on audit results or consideration of other factors.WHAT IS THE AUDITOR’S RESPONSIBILITY FOR DETECTING FINANCIAL REPORTING FRAUD?It is management’s responsibility to design and implement programs and controls to prevent, deter, and detect financial reporting fraud. Audits are designed to identify and assess fraud risk and detect material financial reporting fraud. The PCAOB auditing stand-ards require that an independent auditor plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. However, as noted in PCAOB Interim Auditing Standard AU Section 316, Consideration of Fraud in a Financial Statement Audit, ab-solute assurance is not attainable and thus even a properly planned and performed audit may not detect a material misstatement resulting from fraud. A material misstatement may not be detected because of the nature of audit evidence or because the character-istics of fraud may cause the independent auditor to rely unknowingly on audit evidence that appears to be valid, but is, in fact, false and fraudulent. 10
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How Does the Auditor Perform a Financial Statement Audit?11Developing an Audit StrategyWith a mindset of professional skepticism, independ-ent auditors seek to gather sufficient, appropriate audit evidence to support their opinion about the financial statements. Because the facts and circumstances of an audit typically vary dramatically between companies, the standards describe a principles-based process and provide guidance to help independent auditors use their judgment in the application of these principles on a par-ticular engagement.In developing an audit strategy, the independent auditor considers internal controls and determines whether to rely on those controls for various com-ponents of the audit. The independent auditor may decide (and for public companies with market capital-ization of $75 million or more, auditors are required) to perform tests of the company’s internal control over financial reporting. An independent auditor assesses
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  • Summer '14
  • Financial audit, independent auditor

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