Fraud Deterrence - SAS 99

SAS 99

Statement on Auditing Standards No. 99 (SAS 99), Consideration of Fraud in a Financial Statement Audit, was “the first major audit standard to be released since the passage of Sarbanes-Oxley” (AICPA, Detection in a GAAS Audit: SAS No. 99 Implementation Guide). While the standard was intended to assist auditors in detecting fraud during a financial statement audit, its application was more pervasive. “SAS No. 99 has the potential to significantly improve audit quality, not just in detecting fraud, but in detecting all material misstatements and improving the quality of the financial reporting process” (AICPA, Fraud Detection in a GAAS Audit: SAS No. 99 Implementation Guide).

The SAS 99 Practice Aid discusses fraud deterrence in addition to its primary focus of fraud detection, “Because fraud prevention, detection, deterrence are management’s responsibility, the new fraud SAS now requires you to determine whether management has designed programs and controls that address identified risks of material misstatement due to fraud and whether those programs and controls have been placed in operation” (AICPA, Detection in a GAAS Audit: SAS No. 99 Implementation Guide). In essence, the AICPA has identified that fraud deterrence can be achieved through the implementation of controls and procedures that mitigate (Mitigating Controls) against areas already identified as risk areas.