Auditor's Fraud responsibility

Topics: Auditing, Audit, Financial audit Pages: 4 (533 words) Published: November 10, 2013
Paragraph 4 of ISA/HKSA 240 (Clarified) prescribes the primary responsibility for the

prevention and detection of fraud rests with both those charged with governance of

the entity and with management.

ISA/HKSA 240 (Clarified) also provides expanded operational guidance for auditors

to consider the existence of material misstatement due to fraud in a financial

statement audit. It emphasizes the auditor’s increased responsibility for detecting

fraud, and the auditor is now required to be more proactive in searching for fraud

during the whole audit process under ISA/HKSA 240 (Clarified). This is also complying

with the professional skepticism duty owed by auditor.

ISA 240 expanded operational guidance

The objectives of the auditor are:

(a) To identify and assess the risks of material misstatement of the financial

statements due to fraud;

(b) To obtain sufficient appropriate audit evidence regarding the assessed risks

of material misstatement due to fraud, through designing and implementing

appropriate responses; and

(c) To respond appropriately to fraud or suspected fraud identified during the audit.

If the auditor has identified a fraud or has obtained information that indicates that

a fraud may exist, the auditor shall communicate these matters on a timely basis

to the appropriate level of management in order to inform those with primary

responsibility for the prevention and detection of fraud of matters relevant to their


Where having discussed an identified suspected or actual instance of fraud which

could have a material effect on the financial statements with those charged with

governance and considered any views expressed on behalf of the entity and in the

light of any legal advice obtained, the auditors conclude that the matter ought

to be reported to a proper authority in the public interest, they would, except in

the circumstances covered...
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