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AICPA American Institute of Certified Public Accountants Illegal Acts by Clients 1. This Statement provides guidance for an auditor when client acts that appear to him to be illegal come to his attention during an examination of financial statements in accordance with generally accepted auditing standards. This Statement also discusses the extent of the attention he should give, when performing such an examination, to the possibility that such acts may have occurred. The types of acts encompassed by this Statement include illegal political contributions, bribes, and other violations of laws and regulations. 2. This Statement sets forth guidelines for the appropriate conduct of an auditor in fulfilling his obligation to report on financial statements in accordance with professional standards when he becomes aware of an illegal act ( paragraphs 4- 17). It also offers practical suggestions for an auditor in connection with illegal acts not having a material effect on the financial statements ( paragraph 18) and sets forth considerations applicable to notification of other parties of an illegal act ( paragraph 1 9 ). 3. An examination made in accordance with generally accepted auditing standards cannot be expected to provide assurance that illegal acts will be detected. 1 In reporting on financial statements, an auditor holds himself out as one who is proficient in accounting and 1 See SAS No. 16, " The Independent Auditor's Responsibility for the Detection of Errors or Irregularities," regarding the limitations of an examination in accordance with generally accepted auditing standards. Copyright © 1977 by the American Institute of Certified Public Accountants, Inc. 1211 Avenue of the Americas, New York, N. Y. 10036 Statement on Auditing Standards Issued by the Auditing Standards Executive Committee January 1977 17