The CAQ is pleased to share our views related to the IAASB’s Proposed International Standard on Auditing 240 (Revised): The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. The CAQ is supportive of the IAASB’s efforts to clarify and enhance the auditor’s responsibilities relating to fraud in an audit of financial statements, including highlighting the importance of professional skepticism in the audit, as a means of enhancing public trust in financial reporting. We appreciate that the IAASB has incorporated into ED-240 the feedback from stakeholders on their previously issued discussion paper, 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 (September 2020). Among other matters, our comment letter:
- Highlights the potential unintended expansion (or perceived expansion) of the role and responsibilities of the auditor and the potential inadvertent expansion of the expectation gap, provides related recommendations, and highlights the importance of communication and education by the IAASB regarding what the proposed changes are and what they can reasonably be expected to achieve
- Recommends certain changes to enhance the Board’s efforts to build on the foundational requirements in ISA 315 (Revised 2019) and other ISAs to support a more robust risk identification and assessment as it relates to fraud in an audit of financial statements
- Provides recommendations to enhance the scalability of the requirements of the auditor in ED-240 related to fraud or suspected fraud
- Encourages the Board to consider whether ISA 701 is sufficient without the addition of the proposed incremental requirements in ED-240 related to Key Audit Matters and provides related recommended changes to ISA 700 and 701 as an alternative approach to achieving the Board’s objectives related to transparency
Read the full comment letter here.