ASA 240 - The Auditor’s Responsibility to Consider Fraud in an Audit of a Financial Report - April 2006
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Main Features
This Auditing Standard:
(a) distinguishes fraud from error and describes the types of fraud relevant to the auditor, that is, misstatements resulting from misappropriation of assets and misstatements resulting from fraudulent financial reporting;
(b) requires the engagement team to maintain an attitude of professional scepticism, recognising the possibility that a material misstatement due to fraud could exist, and to discuss the susceptibility of the entity’s financial report to material misstatement due to fraud;
(c) requires the auditor to:
(i) identify and assess the risks of material misstatement due to fraud at the financial report level and the assertion level;
(ii) evaluate the design of the entity’s related controls to determine whether they have been implemented;
(iii) determine overall responses to address the risks of material misstatement due to fraud at the financial report level; and
(iv) design and perform audit procedures to respond to the risk of management override of controls;
(d) requires written management representations relating to fraud;
(e) requires communication with management and those charged with governance; and
(f) establishes documentation requirements.