Consideration of fraud in financial statement independent audit: An inquiry within the context of SAS 99 and comparison with SPK regulation

Financial Statement Fraud is the deliberate misstatements or omissions of amounts or disclosures of financial statements with the intent to deceive and injure financial statement users. Financial statement is harmful as it undermines the quality and integrity of financial reporting process, diminishes the confidence of capital markets and jeopardizes the integrity and objectivity of auditing profession. Although there are many schemes to perpetrate financial statement fraud, only misstatements arising from fraudulent financial reporting and misstatements arising from misappropriation of assets are related to auditor?s consideration during independent audit.American Institute of Certified Public Accountants issued SAS 99 in response to fraudulent activities in some of the largest companies in United States and to restore loss of public confidence in audited financial statements. The matters of fraud in financial statement and auditor?s responsibility to identify fraud are also discussed in the amending Communiqué Regarding Independent Auditing in Capital Markets issued by Board of Capital Market. Comparing with SAS 99, the commentaries and requirements of communiqué relating to auditor?s consideration of fraud in financial statements are nearly the same. Both documents establish additional audit procedures to help auditors assess areas of risk detect fraud and communicate both fraud risk and known or suspected fraud.Conduct of independent audits according to the requirements of both documents will necessitate auditors to develop new skills and make independent audit engagements more time consuming and expensive. The effective practice of communiqué in Turkey also requires enactment of drafted commerce which mandates auditing conducted in conformity with international standards on auditing.