Statement on auditing standards, 017

              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