Statement on auditing standards, 054

              Statement on
Auditing Standards
Issued by the Auditing Standards Board
AICPA American Institute of
Certified Public Accountants
Illegal Acts By Clients
( Supersedes Statement on Auditing Standards No. 17, AICPA, Professional
Standards, vol. 1, AU sec. 328.)
1. This Statement prescribes the nature and extent of the consider­ation
an independent auditor should give to the possibility of illegal
acts by a client in an audit of financial statements in accordance with
generally accepted auditing standards. The Statement also provides
guidance on the auditor's responsibilities when a possible illegal act
is detected.
Definition of Illegal Acts
2. The term illegal acts, for purposes of this Statement, refers to
violations of laws or governmental regulations. Illegal acts by clients
are acts attributable to the entity whose financial statements are under
audit or acts by management or employees acting on behalf of the
entity. Illegal acts by clients do not include personal misconduct by the
entity's personnel unrelated to their business activities.
Dependence on Legal Judgment
3. Whether an act is, in fact, illegal is a determination that is nor­mally
beyond the auditor's professional competence. An auditor, in
reporting on financial statements, presents himself as one who is profi-
Copyright © 1988 by the
American Institute of Certified Public Accountants, Inc.
1211 Avenue of the Americas, New York, N. Y. 10036- 8775
1234567890 AudS 898
April 1988
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