Evaluation of Sas No.99 Response to the Recommendations of the Panel on Audit Effectiveness

Evaluation of SAS NO.99 response to the recommendations of the Panel on Audit Effectiveness

I. Abstraction

As a response to the recommendations of the Panel on Audit Effectiveness issued on August 31, 2000, the Auditing Standards Board of AICPA issued SAS 99, which supersedes SAS 82. SAS 99, which incorporates many recommendations, emphasizes on the professional skepticism and require risk-based audit. The primary criticism of SAS 99 is that many procedures are suggested rather than required. As a result, auditors must consider the requirements of SAS 99 as the minimum level of work required to detect fraud. 

II. The content of the recommendations of the Panel on Audit Effectiveness

The recommendations of the Panel on Audit Effectiveness were issued on August 31, 2000. According to Panel Chair Shaun F. O'Malley, the Report's goal is to foster more effective audits that improve the reliability of financial statements, enhance their credibility, contribute to investors' confidence in the profession, and improve the efficiency of the capital markets. (POB) Among the Panel's there are two major recommendations.

* The risk-based approach to audits of financial statements is appropriate, but it needs to be enhanced, updated, and implemented more consistently.

* Auditors should perform ‘forensic-type’ procedures on every audit to enhance the prospects of detecting material financial statement fraud. i (POB)

III. The response of SAS NO.99 to the recommendations of the Panel on Audit Effectiveness

SAS 99 does an adequate job at responding to the Panel on Audit Effectiveness’ recommendations regarding fraud, since it results in a greater emphasis on professional skepticism to satisfy risk-based auditing and provides guidance for forensic procedures that are expected to be part of an audit when there is no allegation of fraud.

i. Requirement of professional skepticism

Due professional care requires the auditor to exercise...