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CAS 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements

Ef­fec­tive date:

Effective for audits of financial statements for periods ending on or after December 14, 2010, except for subsequent amendments.

[Canadian Auditing Standard (CAS) 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements, should be read in conjunction with CAS 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Canadian Auditing Standards.]

Overview

This Canadian Auditing Standard (CAS) deals with the auditor's responsibilities relating to fraud in an audit of financial statements. Misstatements in the financial statements can arise from either fraud or error. The distinguishing factor between fraud and error is whether the underlying action that results in the misstatement of the financial statements is intentional or unintentional. Although fraud is a broad legal concept, for purposes of the CASs, the auditor is concerned with fraud that causes a material misstatement in the financial statements. Two types of intentional misstatements are relevant to the auditor — misstatements resulting from fraudulent financial reporting and misstatements resulting from misappropriation of assets.

The primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management. It is important that management, with the oversight of those charged with governance, place a strong emphasis on fraud prevention, which may reduce opportunities for fraud to take place, and fraud deterrence, which could persuade individuals not to commit fraud because of the likelihood of detection and punishment. This involves a commitment to creating a culture of honesty and ethical behavior which can be reinforced by an active oversight by those charged with governance.

An auditor conducting an audit in accordance with CASs is responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the CASs.

His­tory of CAS 240

Date

De­vel­op­ment

Com­ments

August 2012

The issuance of revised CAS 610, Using the Work of Internal Auditors, gave rise to a conforming amendment in paragraph 19 of CAS 240.

The amended paragraph 19 of CAS 240 is effective for periods ending on or after December 15, 2013.

Oc­to­ber 2016

The issuance of CAS 250, Consideration of Laws and Regulations in an Audit of Financial Statements, (NOCLAR) gave rise to conforming amendments in paragraphs 41-44.

Paragraphs 41-44 are effective for periods ending on or after December 15, 2018. [In ISA 240, the equivalent paragraphs' effective date is for periods beginning on or after December 15, 2017.] The amend­ments were in­cluded in a Hand­book up­date in March 2017. See Pro­ject.

Note: The above sum­mary does not in­clude de­tails of con­se­quen­tial amend­ments made as the re­sult of other pro­jects.

Amendments under consideration

  • None

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