Consolidating financial statement

29 Dec

In addition, management personnel at a component of the entity may be in a position to manipulate the accounting records of the component in a manner that causes a material misstatement in the consolidated financial statements of the entity.Management override of controls can occur in unpredictable ways., character, or set of ethical values that allow them to knowingly and intentionally commit a dishonest act.However, even otherwise honest individuals can commit fraud in an environment that imposes sufficient pressure on them.Fraud also may be concealed through collusion among management, employees, or third parties.Collusion may cause the auditor who has properly performed the audit to conclude that evidence provided is persuasive when it is, in fact, false.Appendix A: Examples of Information and Sources of Information That May be Gathered During the Audit That Could Indicate That Related Parties or Relationships or Transactions with Related Parties Previously Undisclosed to the Auditor Might Exist The following auditing standard is not the current version and does not reflect any amendments effective on or after December 31, 2016. For audits of fiscal years beginning before December 15, 2010, click here] Although this section focuses on the auditor's consideration of fraud in an audit of financial statements, it is management's responsibility to design and implement programs and controls to prevent, deter, and detect fraud.

As another example, the auditor may receive a false confirmation from a third party that is in collusion with management.

An audit conducted in accordance with GAAS rarely involves the authentication of such documentation, nor are auditors trained as or expected to be experts in such authentication.

In addition, an auditor may not discover the existence of a modification of documentation through a side agreement that management or a third party has not disclosed.

For example, management that engages in fraudulent financial reporting might alter shipping documents.

Employees or members of management who misappropriate cash might try to conceal their thefts by forging signatures or falsifying electronic approvals on disbursement authorizations.