And yet, a recent survey of peer reviewers participating in the AICPA Peer Review program indicated that nearly half of the 400 audits they reviewed last year didn't comply with AU-C Section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement, or AU-C Section 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained, because auditors did not properly obtain an understanding of relevant controls.
If a client had no controls in place, there would be no way to prevent or detect and correct a material misstatement. If that's true, it would not be possible to do sufficient audit work to reduce audit risk to an acceptable level.
Auditing Standard (AS) 1001, Responsibilities and Functions of the Independent Auditor, clearly states that "the auditor has a responsibility to plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud.
It is true that the auditor is not responsible for detection of all fraud; for the auditor to have any detection responsibility, the fraud must misstate the financial statements, and the misstatement must be material.
Given the tremendous growth in the use of information technology by all types of organizations since the late 1980s, it is important for researchers and practitioners to examine more recent misstatement to ensure high quality of financial reporting disclosed to public.
The impact of using CAATs is the auditor can formulate a range of alternative hypotheses for a particular potential misstatement in the subject matter and then test those hypotheses immediately using datasets drawn from the accounting information system.
In the alternative, Woods argued that any underpayment of tax in this case would be "attributable" not to the misstatements
of outside basis, but rather to the determination that the partnerships were shams, which he described as an "independent legal ground." The Fifth and Ninth Circuits had taken this position in refusing to apply the valuation-misstatement penalty in similar cases (see Bemont Investments LLC, 679 F.3d 339 (5th Cir.
Companies are strictly liable under Section 11 for their misstatements
when issuing securities; overturning Basic would not change this.
We have adopted a new approach, which is we do not leave any misstatement
or inaccuracy unanswered.
* Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
: Supersedes AU Section 314, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement
TARGETED VICARIOUS LIABILITY FOR FINANCIAL MISSTATEMENTS
The majority judgement said it could not be held that Sheikh Rashid made any misstatement
in his nomination papers.