Accounting Firms
Since the drafting of SAS 82, the accounting industry, as a whole,
has recognized the heightened role it must play in identifying
potential risk factors of fraud. As the corporate scandals of Enron,
MCI, and other entities have demonstrated there is increased need
for Accounting Firms to “know their client.”
FRM can assist accounting firms to mitigate their risk when
accepting new audit engagements by identifying possible risk factors
of fraud associated with management including historical cases of
fraud management may have been involved in, prior instances where
financial statements were restated as a result of aggressive
reporting mechanisms, undisclosed contingent liabilities,
self-dealing, and less than arm’s length transactions.
FRM accomplishes this by working with the auditor in performing a
thorough review of publicly available information on management
including criminal records, bankruptcies, lawsuits, judgments, tax
liens, UCC-1 filings, news articles, regulatory sanctions, and
verifications of management’s curriculum vitae and prior work
history before accepting a new audit client on board. Upon reaching
the comfort level with management to accept the new audit client,
FRM provides services on the entity as part of the annual audit
process to make sure undisclosed contingent liabilities are properly
foot noted as part of the audit engagement.
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