It’s Not Possible that the Auditing Firm of Moss Levy Harztheim Properly Audited Beaumont Without Discovering Fraud.
By: Libi Uremovic| Original Article at Patch.com
AU Section 150
Generally Accepted Auditing Standards
.01 An independent auditor plans, conducts, and reports the results of an audit in accordance with generally accepted auditing standards. Auditing stan- dards provide a measure of audit quality and the objectives to be achieved in an audit. Auditing procedures differ from auditing standards.
Auditing procedures are acts that the auditor performs during the course of an audit to comply with auditing standards.
Auditing Standards
.02 The general, field work, and reporting standards (the 10 standards) approved and adopted by the membership of the AICPA, as amended by the AICPA Auditing Standards Board (ASB), are as follows:
General Standards
- The auditor must have adequate technical training and proficiency to perform the audit.
- The auditor must maintain independence in mental attitude in all matters relating to the audit.
- The auditor must exercise due professional care in the performance of the audit and the preparation of the report.
Standards of Field Work
- The auditor must adequately plan the work and must properly supervise any assistants.
- The auditor must obtain a sufficient understanding of the entity and its environment, including its internal control, to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures.
- The auditor must obtain sufficient appropriate audit evidence by performing audit procedures to afford a reasonable basis for an opinion regarding the financial statements under audit.
A.12 Government programs are subject to many provisions of laws, regulations, contracts or grant agreements. At the same time, their significance within the context of the audit objectives varies widely, depending on the objectives of the audit. Auditors may find the following approach helpful in assessing whether provisions of laws, regulations, contracts or grant agreements are significant within the context of the audit objectives:
a. Express each audit objective in terms of questions about specific aspects of the program being audited (that is, purpose and goals, internal control, inputs, program operations, outputs, and outcomes).
b. Identify provisions of laws, regulations, contracts or grant agreements that directly relate to specific aspects of the program within the context of the audit objectives.
c. Determine if the audit objectives or the auditors’ conclusions could be significantly affected if noncompliance with those provisions of laws, regulations, contracts or grant agreements occurred. If the audit objectives or audit conclusions could be significantly affected, then those provisions of laws, regulations, contracts or grant agreements are likely to be significant to the audit objectives.
AU §150.02
1600 Statements on Auditing Standards—Introduction Standards of Reporting 2
- The auditor must state in the auditor’s report whether the financial statements are presented in accordance with generally accepted accounting principles.
- The auditor must identify in the auditor’s report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.
- When the auditor determines that informative disclosures are not reasonably adequate, the auditor must so state in the auditor’s report.
- The auditor must either express an opinion regarding the finan-cial statements, taken as a whole, or state that an opinion cannot be expressed, in the auditor’s report. When the auditor cannot express an overall opinion, the auditor should state the reasons therefor in the auditor’s report. In all cases where an auditor’s name is associated with financial statements, the auditor should clearly indicate the character of the auditor’s work, if any, and the degree of responsibility the auditor is taking, in the auditor’s report.
A.07 GAGAS contains requirements for responding to indications of material abuse and reporting abuse that is material to the audit objectives.
A.08 The following are examples of abuse, depending on the facts and circumstances:
a. Creating unneeded overtime.
b. Requesting staff to perform personal errands or work
tasks for a supervisor or manager.
c. Misusing the official’s position for personal gain (including actions that could be perceived by an objective third party with knowledge of the relevant information as improperly benefiting an official’s personal financial interests or those of an immediate or close family member; a general partner; an organization for which the official serves as an officer, director, trustee, or employee; or an organization with which the official is negotiating concerning future employment).
d. Making travel choices that are contrary to existing travel policies or are unnecessarily extravagant or expensive.
e. Making procurement or vendor selections that are contrary to existing policies or are unnecessarily extravagant or expensive.
A.09 GAGAS contains requirements relating to evaluating fraud risk.
A.10 In some circumstances, conditions such as the following might indicate a heightened risk of fraud:
a. economic, programmatic, or entity operating conditions threaten the entity’s financial stability, viability, or budget;
b. the nature of the entity’s operations provide opportunities to engage in fraud;
c. management’s monitoring of compliance with policies, laws, and regulations is inadequate;
d. the organizational structure is unstable or unnecessarily complex;
e. communication and/or support for ethical standards by management is lacking;
f. management is willing to accept unusually high levels of risk in making significant decisions;
g. the entity has a history of impropriety, such as previous issues with fraud, waste, abuse, or questionable practices, or past audits or investigations with findings of questionable or criminal activity;
h. operating policies and procedures have not been developed or are outdated;
i. key documentation is lacking or does not exist;
j. asset accountability or safeguarding procedures is lacking;
k. improper payments;
l. false or misleading information;
m. a pattern of large procurements in any budget line with remaining funds at year end, in order to “use up all of the funds available;” and
n. unusual patterns and trends in contracting, procurement, acquisition, and other activities of the entity or program.