The Public Company Accounting Oversight Board has issued a document advising auditors to beware of unusual transactions that could be signs of fraud.
Staff Audit Practice Alert No. 5, Auditor Considerations Regarding Significant Unusual Transactions, includes the relevant requirements from several existing PCAOB auditing standards about significant unusual transactions to help auditors detect potential errors or fraud while reviewing interim financial information and auditing financial statements.
The alert covers subjects such as identifying and assessing risks of material misstatement; responding to the risks of material misstatement; consulting others; evaluating financial statement presentation and disclosure; communicating with audit committees; and reviewing interim financial information.
The PCAOBs message to auditors, in this challenging economic environment, has consistently emphasized attention to audit risk and adherence to existing audit requirements," said PCAOB chief auditor and director of professional standards Martin F. Baumann in a statement.
Practice Alert No. 5 complements Staff Audit Practice Alert No. 3, Audit Considerations in the Current Economic Environment, by further addressing risks of material misstatement associated with significant unusual transactions, a risk that the staff believes continues to exist today.
The PCAOB noted that the statements contained in Staff Audit Practice Alerts are not official PCAOB rules and do not reflect any board determination or judgment about the conduct of any particular firm, auditor or any other person.
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