Section Identification and Assessment of the Ris - ASA 240 - The Auditor’s Responsibilities Relating to Fraud in an Audit of a Financial Report - October 2009 - Identification and Assessment of the Risks of Material Misstatement Due to Fraud

Identification and Assessment of the RisIdentification and Assessment of the Risks of Material Misstatement Due to Fraud

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Identification and Assessment of the Risks of Material Misstatement Due to Fraud

In accordance with ASA 315, the auditor shall identify and assess the risks of material misstatement due to fraud at the financial report level, and at the assertion level for classes of transactions, account balances and disclosures.[8]
When identifying and assessing the risks of material misstatement due to fraud, the auditor shall, based on a presumption that there are risks of fraud in revenue recognition, evaluate which types of revenue, revenue transactions or assertions give rise to such risks. Paragraph 48 of this Auditing Standard specifies the documentation required where the auditor concludes that the presumption is not applicable in the circumstances of the engagement and, accordingly, has not identified revenue recognition as a risk of material misstatement due to fraud. (Ref: Para. A29‑A31)
The auditor shall treat those assessed risks of material misstatement due to fraud as significant risks and accordingly, to the extent not already done so, the auditor shall identify the entity’s controls that address such risks, and evaluate their design and determine whether they have been implemented).[9] (Ref: Para. A32‑A33)