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SAS No. 99 responses to the Panel on Audit Effectiveness
The Audit Effectiveness Panel was issued by the Public Oversight Board (POB) in 1998 to address current deficiencies in audit targets and procedures. The Public Oversight Board is a self-regulatory system that oversees auditors of public corporations to ensure that auditing provides the public with accurate information. According to the Audit Effectiveness Panel chapter (1998), POB addressed audit problems on several aspects including risk management and audit procedures. As it mentioned in chapter 2, it points out that the current auditing standards focused only on detecting material fraud, which is not enough. It recommends auditing standards to exam fraud in an active, throughout way. To reach the new standard, it suggests auditors to act more skeptical; get a deeper understanding of the entity's business process, risks, and controls; as well as increase substantive tests amount.
Ã¯Â¿Â½It also offered several recommendations to the auditors in its chapter 3 panel. Audit Standard Board responded to the panel in 2001 by issuing Statement on Audit Standards No. 99 to make up the deficiencies in auditing standards in fraud and use of forensics areas.
After long time of discussion and investigation, POB summarized five major problems in fraud auditing and accordingly made recommendations to improve these aspects. Based on what POB said in chapter 3 of the panel, the problems are stated below:
First of all, the Panel found that SAS No. 82 fails to directly set audit guidelines addressing fraud issue. This absence of guidelines influenced auditor's effectiveness in looking for fraud. Also, it points out that GASS fails to provide adequate guidance about accounting professional skepticism in management issues. Instead of holding at least some level of skeptics about management integrity, auditors always assume managements...