Exposure Draft – Fraud

The International Auditing and Assurance Standards Board (IAASB) issued an exposure draft to revise International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements that will: 

• clarify the role and responsibilities of the auditor for fraud in an audit of financial statements;
• establish more robust requirements and clarify application material where necessary to promote consistent behaviour and facilitate effective responses to identified risks of material misstatement due to fraud;
• reinforce the importance, throughout the audit, of the appropriate exercise of professional skepticism in fraud-related audit procedures; 
• enhance transparency on fraud-related procedures, including strengthening communications with those charged with governance;
• include Key Audit Matters related to fraud in the auditor’s report of listed entities to enhance transparency; and
• enhance documentation requirements for specific aspects of the auditor’s work related to fraud.

Comments are requested by June 5, 2024. The IAASB proposes that ISA 240 be effective for financial reporting periods beginning approximately 18 months after the approval of the standard.

The Canadian Auditing and Assurance Standards Board (AASB) has also issued an exposure draft for  Canadian Auditing Standard (CAS) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. The AASB does not propose new Canadian amendments to the requirements or application material of proposed ISA 240 (Revised).