Fraud [ED]
|
Comments are requested by the (i) AASB, by May 6, 2024; (ii) IAASB, by June 5, 2024 |
|
|
Next steps: |
The IAASB will review feedback received on its exposure draft in September 2024. |
|
Last updated: |
March 2024 |
Overview
On September 15, 2020, the International Auditing and Assurance Standards Board (IAASB) opened a public consultation, "Fraud and Going Concern in an Audit of Financial Statements: Exploring the Differences Between Public Perceptions About the Role of the Auditor and the Auditor’s Responsibilities in a Financial Statement Audit".
Based on the feedback to the Consultation Paper, the IAASB decided to proceed with developing an Exposure Draft to amend ISA 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements.
The Auditing and Assurance Standards Board (AASB) conducted extensive outreach to obtain Canadian views on the matters discussed in the IAASB’s Consultation Paper. Consistent with respondents’ views, the AASB expressed support for the IAASB in pursuing a project to revise ISA 240. In addition, in October 2021, the AASB, in collaboration with the Association of Chartered Certified Accountants, the Chartered Professional Accountants of Canada, and Chartered Accountants Australia and New Zealand, released a report “Closing the Expectation Gap in Audit – The Way Forward on Fraud and Going Concern: A Multi-stakeholder Approach.” The report examines the auditor’s role in the areas of fraud and going concern and the related expectation gap and identifies recommendations to narrow this gap.
On February 6, 2024, the IAASB proposed a significant strengthening of its standard on auditors’ responsibilities relating to fraud, with a 120-day consultation period. The proposed revisions define the expectations in relation to fraud, delineate more robust procedures, and increase transparency about the auditors’ responsibilities and fraud-related procedures in the auditor’s report.
Key Changes in the Proposed Revisions include:
- Clarified auditor responsibilities relating to fraud in an audit.
- Emphasized professional skepticism to ensure auditors remain alert to possible fraud and exercise professional skepticism throughout an audit.
- Strengthened identification and assessment of risks of material misstatement due to fraud.
- Clarified response to fraud or suspected fraud identified during the audit.
- Increased ongoing communication with management and those charged with governance about fraud.
- Increased transparency about auditors’ responsibilities and fraud-related procedures in the auditor’s report.
- Enhanced audit documentation requirements about fraud-related procedures.
In January 2024, the AASB unanimously approved the Canadian Exposure Draft and in March 2024, issued it. The AASB exposure draft does not include additional Canadian amendments to the proposed ISA 240 (Revised); however, it proposes to retain the practice of replacing references to the International Ethics Standards Board for Accountants’ (IESBA) Code with ethical requirements that are relevant in Canada.
The response deadline for the comments is May 6, 2024. The AASB plans, subject to comments received following exposure, to adopt proposed ISA 240 (Revised) and any conforming and consequential amendments to other ISAs.
The IAASB expects to approve the final ISA 240 (Revised) in March 2025. The IAASB proposes that ISA 240 (Revised) be effective for audits of financial statements for periods beginning approximately 18 months after the final standard is approved. The IAASB will coordinate the effective date of the final ISA 240 (Revised) with its project to revise ISA 570 (Revised 202X), Going Concern and the Listed Entity and the Public Interest Entity (Track 2). Earlier application would be permitted. The revised CAS 240 is expected to have the same effective date as the revised ISA. Auditors will be permitted to apply the revised CAS before the effective date.
For more information, visit:
