Our external auditors arrived today. They are talking about new FAS 99 which indicates that fraud testing is required for external audits. I do not know anything about this. Can anyone help?

SAS 99 gives U.S. auditors expanded guidance for detecting material fraud. Click Here This should explain a bit of it for you.

The effect that I have seen was a twofold approach. Our external auditors began using these new techniques last year. This first test was a multipage questionnaire for bank management to complete. It asks a multitude of questions regarding risk exposures and if you believe your institution is suceptible to any of them. (Basically it would be a self incriminating report and I feel it is not much of any use except maybe in a large institution.)

Next, the head of the audit team came in and closed the door and did the good ol' "So how are things going really? Do you have any concerns about management or the board? Etc.." This approach allows the bank's auditor to verbally express any concerns they may have about issues that they have dealt with or seen that maybe management decided not to address - but again, self increminating. I know that due to the Sarbanes Oxley and in reacting to all the corporate scandal they felt like they had to try new methodologies, but unless someone REALLY feels like something unethical or illegal is going on in their institution and are willing to forego their job, I don't see this as providing much more insight than they had before.

I think the key is to do more testwork. That is where you find problems.

KPMG presented what they are going to do for the Fraud standard at our bank. It is focused on expense reports for Exec officers and AP for vendors.

Thanks for your responses. I found them very helpful!

All I am saying is that if I were to answer these questions with answers that would cause them to scrutinize areas they had not before or if it was ever suggested to management that I gave them an indication that something wasn't right, the President and CEO would know exactly where this came from.

As I work for a small bank with VERY conservative values it would not bear well with my employment if I provided information that would cause the external auditors to investigate issues that I have directly or indirectly caused to come to light.

Is this right? Are my thoughts about this improper? Maybe. But I know how our executive management thinks and although everything may be on the Up and Up, it would still create a hardship for my position.