Auditing

Responsibilities and Functions of the Independent Auditor

The auditor has a responsibility to 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.

Risk Factors Relating to Misstatements Arising From

Fraudulent Financial Reporting

.16

Risk factors that relate to misstatements arising from fraudulent financial reporting may be grouped in the following three categories:

a Management's characteristics and influence over the control environment. These pertain to management's abilities, pressures, style, and attitude relating to internal control and the financial reporting process.

b Industry conditions. These involve the economic and regulatory environment in which the entity operates.

c Operating characteristics and financial stability. These pertain to the nature and complexity of the entity and its transactions, the entity's financial condition, and its profitability.

AU 342 Auditing Accounting Estimates

Accounting estimate. This is an approximation of a monetary amount in the absence of a precise measurement. This term applies for fair value and other estimates when there is estimation uncertainty.

Severe Consequences jail fine

KPMG agreed to pay $22 million to the Sec to settle the lawsuit .

KPMG partners involved in the fraud paid $100,000- $150,000 and agreed to suspensions from practice.

Xerox agreed to pay $670 million and KPMP agreed to pay $80 million to settle the shareholder lawsuits related to the fraud.

Auditing Standard No. 15 - Inspection, observation,

inquiry, confirmation, recalculation, reperformance,

analytical procedures

1. This standard explains what constitutes audit evidence and establishes requirements regarding designing and performing audit procedures to obtain sufficient appropriate audit evidence.

2. Audit evidence is all the information, whether obtained from audit procedures or other sources, that is used by...