Statement on auditing standards, 016

              Statement on
Auditing Standards
Issued by the Auditing Standards Executive Committee
AICPA American Institute of
Certified Public Accountants
The Independent Auditor's Responsibility
for the Detection of Errors or Irregularities
( Supersedes Statement on Auditing Standards No. 1, section 110.05-. 08)
1. This Statement provides guidance on the independent auditor's
responsibility for detecting errors or irregularities when making an
examination of financial statements in accordance with generally
accepted auditing standards. It also discusses procedures that the
auditor should perform when his examination indicates that material
errors or irregularities may exist.
2. The term errors refers to unintentional mistakes in financial
statements and includes mathematical or clerical mistakes in the
underlying records and accounting data from which the financial
statements were prepared, mistakes in the application of accounting
principles, and oversight or misinterpretation of facts that existed
at the time the financial statements were prepared.
3. The term irregularities refers to intentional distortions of finan­cial
statements, such as deliberate misrepresentations by manage­ment,
sometimes referred to as management fraud, or misappropri­ations
of assets, sometimes referred to as defalcations. 1 Irregularities
in financial statements may result from the misrepresentation or
1For guidance on other actions that an independent auditor should consider with
respect to the possible illegality of such acts, see SAS No. 17, " Illegal Acts by
Clients."
Copyright © 1977 by the
American Institute of Certified Public Accountants, Inc.
1211 Avenue of the Americas, New York, N. Y. 10036
January 1977 16