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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 54