CPAB Project – Fraud in an Audit of Financial Statements [Completed]
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Next steps: |
CPAB has organized a working group in 2020 to further explore what actions can be taken by all relevant stakeholders to better prevent and detect corporate fraud. |
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Last updated: |
February 2020 |
Overview
There has been a brighter spotlight on fraud recently in the wake of certain high-profile corporate failures. A focus internationally has been on how far an auditor’s responsibility extends in detecting fraud in an audit of the financial statements.
The Canadian Public Accountability Board (CPAB) launched a project in 2019 to explore this topic. This fraud project has two phases. During Phase I, CPAB evaluated how auditors in Canada are complying with the Canadian Auditing Standard 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, (CAS 240). During Phase II, CPAB will be looking beyond CAS 240. As a follow up to its fall 2019 Canadian Audit Quality Roundtable, CPAB is organizing a working group in 2020 to further explore what actions can be taken by all relevant stakeholders to better prevent and detect corporate fraud.
CPAB’s objective for Phase I was to evaluate the quality of audit work being performed by auditors to meet the requirements of CAS 240 and to identify leading audit practices. Based on inspections carried out between March and September 2019, CPAB reviewed the audit work related to the following requirements of CAS 240: (i) fraud risk discussion among the engagement team; (ii) fraud risk assessment procedures and related activities; (iii) responses to assessed risks of material misstatement due to fraud.
What CPAB found was that auditors met the requirements of CAS 240 for the audit files reviewed. During these reviews, however, CPAB identified a number of areas for auditors to consider as they design their audit approaches related to identifying and responding to fraud risks in their audits of financial statements. For further details refer to the CPAB Exchange bulletin of February 2020.
In 2020, the CPAB plans to continue to seek Canadian perspectives on this issue and has organized a working group to further explore what actions can be taken by all relevant stakeholders to better prevent and detect corporate fraud.
Other Developments
February 2020
In February 2020, the CPAB issued an Exchange Bulletin summarizing the results of their work to date on the issue of Fraud in an Audit of Financial Statements and advising stakeholders of CPAB’s plans to carry out further work on this issue during 2020.