While much emphasis has been placed on audit committees' responsibility for the prevention, detection, and correction of fraud and corporate misconduct, there is a more proactive approach to the specific risks and the detection of collusive fraud that is often overlooked. Collusive fraud is perhaps the most costly type of management fraud an audit committee may encounter. The need for audit committee oversight of management's fraud risk assessment has never been greater. The audit committee bears an important stewardship responsibility to shareholders with regard to oversight of the financial reporting process, including internal controls over financial reporting. With a continuing stream of additional guidance and regulation, including the implementation of the Sarbanes-Oxley Act sections 303 and 404, the NYSE and Nasdaq rules regarding audit committee composition and oversight, and newly issued Auditing Standard 5 from the Public Company Accounting Oversight Board, one might conclude that the risk of financial statement fraud has abated.
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