INSIGHTS AND RESOURCES

The external auditor’s responsibilities with respect to illegal acts

FINANCIAL REPORTING INSIGHTS  | 

Authored by RSM US LLP


The Center for Audit Quality (CAQ) recently published an overview of the external auditor’s responsibilities with respect to illegal acts under Public Company Accounting Oversight Board (PCAOB) auditing standards. The publication also explores how the auditor’s responsibility to identify and detect a material financial statement misstatement due to fraud differs from the auditor’s responsibilities related to illegal acts.

Illegal Acts: The External Auditor’s Responsibilities discusses that, under PCAOB standards, an audit normally does not include audit procedures specifically designed to detect illegal acts. However, procedures (e.g., reading board minutes, inquiring of management’s legal counsel concerning litigation and performing testing of financial statement account balances) applied for the purpose of forming an opinion on the financial statements may bring possible illegal acts to the auditor’s attention. Absent specific information concerning possible illegal acts about which the auditor becomes aware, the auditor is not required to perform further audit procedures related to possible illegal acts under PCAOB auditing standards.

If the auditor becomes aware of information concerning a possible illegal act, the auditor is required to obtain an understanding of the nature of the act, the circumstances in which it occurred, and sufficient other information to evaluate the effect on the financial statements, if any. As further discussed in the CAQ’s publication, the auditor’s assessment of the potential impact of the illegal act(s) on the financial statements affects the procedures the auditor may need to perform related to the possible illegal act.

Let's Talk!

Call us at +1 213.873.1700, email us at solutions@vasquezcpa.com or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by RSM US LLP and originally appeared on 2021-07-30.
2021 RSM US LLP. All rights reserved.
https://rsmus.com/our-insights/newsletters/financial-reporting-insights/the-external-auditors-responsibilities-with-respect-to-illegal-acts.html

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

​Vasquez & Company LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.

For more information on how ​Vasquez & Company LLP can assist you, please call +1 213.873.1700.

Subscribe to receive important updates from our Insights and Resources.

  • Should be Empty: