Page 248 - Auditing Standards

As of December 15, 2017
Amendment to Section 333, Management Representations, paragraph

.06 and Appendix A [paragraph .16]

[.87] [Paragraph deleted.]

Exhibit - Management Antifraud Programs and Controls

[.88] [Paragraph deleted.]

Footnotes (AS 2401 - Consideration of Fraud in a Financial Statement Audit):

1 The auditor's consideration of illegal acts and responsibility for detecting misstatements resulting from

illegal acts is defined in AS 2405, Illegal Acts by Clients. For those illegal acts that are defined in that section as
having a direct and material effect on the determination of financial statement amounts, the auditor's
responsibility to detect misstatements resulting from such illegal acts is the same as that for errors or fraud.

2 For purposes of this standard, the term "audit of financial statements" refers to the financial statement
portion of the integrated audit and to the audit of financial statements only.

3 In its October 1987 report, the National Commission on Fraudulent Financial Reporting, also known as the

Treadway Commission, noted, "The responsibility for reliable financial reporting resides first and foremost at the
corporate level. Top management, starting with the chief executive officer, sets the tone and establishes the
financial reporting environment. Therefore, reducing the risk of fraudulent financial reporting must start with the
reporting company."

4 Intent is often difficult to determine, particularly in matters involving accounting estimates and the
application of accounting principles. For example, unreasonable accounting estimates may be unintentional or
may be the result of an intentional attempt to misstate the financial statements. Although an audit is not designed
to determine intent, 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 the misstatement is intentional
or not.

5 The auditor should look to the requirements of the Securities and Exchange Commission for the company

under audit with respect to accounting principles applicable to that company.

6 Frauds have been committed by management override of existing controls using such techniques as (a)
recording fictitious journal entries, particularly those recorded close to the end of an accounting period to

manipulate operating results, (b) intentionally biasing assumptions and judgments used to estimate account
balances, and (c) altering records and terms related to significant and unusual transactions.

7 For a further discussion of the concept of reasonable assurance, see paragraphs .10 through .13 of AS

245