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SAS 99 defines fraud as an intentional act that results in a material misstatement in financial statements. There are two types of fraud considered: misstatements arising from fraudulent financial reporting (e.g. falsification of accounting records) and misstatements arising from misappropriation of assets (e.g. theft of assets or fraudulent expenditures).
The auditor expresses an opinion on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework, such as IFRS. [10] ISA 320, paragraph A3, states that this assessment of what is material is a matter of professional judgement.
A qualified opinion is that the financial statements are presented fairly in all material respects in accordance with US GAAP, except for a material misstatement that does not however pervasively affect the user's ability to rely on the financial statements. A qualified opinion with a scope limitation of limited significance may also be issued ...
Second, auditors are required to consider the risk of material misstatement through understanding the entity and its environment, including the entity's internal control. [3] [4] Financial statement assertions provide a framework to assess the risk of material misstatement in each significant account balance or class of transactions. [5]
The auditor must state in the auditor's report whether the financial statements are presented in accordance with generally accepted accounting principles. The auditor must identify in the auditor's report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period.
SAS No. 51, Reporting on Financial Statements Prepared for Use in Other Countries; SAS No. 59, The Auditor's Consideration of an Entity's Ability to Continue as a Going Concern, as amended; SAS No. 65, The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements;