Error
Due to unintentional misstatements or omissions of amounts or disclosures in the financial statements. Auditors are responsible for detecting material errors
Fraud
Relates to intentional acts that cause a misstatement in the financial statement. Intent to deceive another party
Illegal Acts
Violations of laws or governmental regulations
Auditors have responsibility to detect and report misstatements resulting from illegal acts that have a ______ and ________ effect on the determination of financial statement amounts
Direct; material
What is the auditor's obligation when they conclude an illegal act has or is likely to have occurred?
Assess the impact of the actions on the financial statements including materiality considerations
Illegal acts should be reported to
to those charged with governance such as the audit committee
The auditor should withdraw from engagement if
Client doesn't take remedial action
Fraud Triangle
Incentives/Pressures to commit fraud, Opportunity, rationalization
Misappropriation of Assets
Theft of assets for personal use
Fraud that causes a material misstatement of the financial statements should be of the financial statements should be reported______________
directly to those charged with governance
Introductory Paragraph
Identifies the entity, financial statements being examined, the period covered by the financial statements, and that the statements have been audited
Management's Responsibility
Includes a description of management's responsibility for the preparation and fair presentation of the financial statements in accordance with GAAP including the responsibility for the design, implementation, and maintenance of internal controls necessary
Auditor's Responsibility
Auditor's responsibility to express an opinion based on the financial statement and audit. Includes references to GAAS
Unmodified Opinion
The financial statements present fairly, in all material respects, the financial position of the entity for the years examined in accordance with GAPP