Heralded Fraud SAS Released
fter deliberating under the watchful eyes of both the accounting community and the popular press, the American Institute of CPAs auditing standards board has issued a groundbreaking statement on auditing standards. "SAS no. 82, Consideration of Fraud in a Financial Statement Audit, provides a benchmark for what auditors need to do to fulfill their responsibilities related to consideration of fraud in an audit," David Landsittel, ASB fraud task force chairman, told the Journal. "I am hopeful that the standard will enhance the likelihood of detection of material misstatement due to fraud, further enabling the CPA profession to serve the public interest and increase the value of our services."
A special report in the Journal (June96, page 17), announcing the issuance of the fraud exposure draft, discussed the major issues in the proposed statement. "There were no major changes in structure or focus in the final statement," said Landsittel, "but I dont want to undersell the important input we got." The ASB received comment letters from small and large firms as well as state CPA societies and others. "The input was very helpful in identifying areas where clarification was required. We also received some helpful comments on audits of smaller entities, especially from the Institutes private companies practice section technical issues committee. We made some changes to ensure that the standard was workable for smaller clients."
An article on SAS no. 82, discussing it in more detail, will appear in the April Journal. The Institute also is publishing a practice aid, Fraud: Practical Guidance for Considering Fraud in a Financial Statement, which will be available at the end of the month. SAS no. 82 (product no. 060675JA) is now available. The practice aid (product no. 008883JA) is $59 for members if ordered before publication and $74 thereafter. The Institute also will be making available a range of other guidance products, which will be described in a leaflet included with each copy of SAS no. 82.
Attesting to History
hree of the largest accounting firms in the world have just taken on an international auditing engagement that is as old as it is unusual.
In January 1996, a survey conducted by the Swiss Bankers Association turned up at least 775 dormant accounts, containing Sfr. 38.7 million (approximately $30 million), that may have been opened by Nazi victims seeking to place their assets in a safe place. In May 1996, the World Jewish Restitution Organization, the World Jewish Congress and the Swiss Bankers Association signed a memorandum of understanding to investigate the extent of such accounts, which may have been unclaimed for over 50 years simply because there were no survivors to claim them.(A previous investigation, in 1962, turned up Sfr 9.5 million.)
The memo led to the creation of the seven-member Independent Committee of Eminent Persons, chaired by Paul Volcker, former chairman of the board of governors of the Federal Reserve Bank, and including three members appointed by Jewish organizations and three appointed by the Swiss bank group. In November, the committee chose Arthur Andersen, KPMG Peat Marwick and Price Waterhouse to audit the Swiss banks. The committee itself is the client, although funding is provided by the banking association.
The firms will not only search for dormant accounts but also determine whether any accounts were extinguished in ways that would indicate a breach of fiduciary duty. Since the audit trail is 50 years old, the committee said that "extraordinary efforts of forensic auditing and historical analysis will be required by the auditors, and the usual audit practices, such as sampling to verify the accuracy of records, must be effectively supplemented by the more rigorous disciplines of forensic auditing." The auditors will first work to establish the legal and practical framework in which deposits were made in the banks and then create an audit plan to be tested in pilot audits. The audit work is expected to continue into 1998.
Accountants at the three firms did not want to comment on the audits at this early stage. However, a KPMG press release quoted Martin Foster, head of its United Kingdom forensic accounting practice, as saying that the assignment was "hugely important and historic." London-based members of KPMG have been in Switzerland since December. The committee will issue status reports periodically.