Proposed Revisions Contribute to Public Trust and Confidence in Financial Reporting
The International Auditing and Assurance Standards Board (IAASB) today proposed a significant strengthening of its standard on auditors’ responsibilities relating to fraud. Recent corporate failures throughout the world have underscored the benefits of clarifying and enhancing the role of auditors in responding to fraud and suspected fraud as a means of enhancing public trust in financial reporting.
IAASB Chair Tom Seidenstein emphasized that the proposed revisions define the expectations in relation to fraud, delineate more robust procedures, and increase transparency about the auditors’ responsibilities and fraud-related procedures in the auditor’s report. “While many participants in the financial reporting ecosystem, particularly management and those charged with governance, have a role in preventing fraud, our standard focuses on the key role that auditors play. While auditors are not policemen, they can and must play a role in identifying and responding to material misstatements of the financial statements due to fraud and communicating their work to users. This proposed standard is an important step forward,” said Mr. Seidenstein.
Key Changes in the Proposed Revisions
The proposed revisions to International Standard on Auditing 240 (Revised), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, include:
- Clarified auditor responsibilities relating to fraud in an audit.
- Emphasized professional skepticism to ensure auditors remain alert to possible fraud and exercise professional skepticism throughout an audit.
- Strengthened identification and assessment of risks of material misstatement due to fraud.
- Clarified response to fraud or suspected fraud identified during the audit.
- Increased ongoing communication with management and those charged with governance about fraud.
- Increased transparency about auditors’ responsibilities and fraud-related procedures in the auditor’s report.
- Enhanced audit documentation requirements about fraud-related procedures.
Video Series Planned to Facilitate Understanding
During the consultation period, IAASB will release a videos series to help stakeholders understand the proposed revisions and their implications for strengthening the financial reporting ecosystem. Stay updated on upcoming events by following the IAASB on LinkedIn and/or X (formerly Twitter) and register/subscribe to our mailing list.
How to Provide Feedback
The IAASB invites all stakeholder to submit their comments using the Response Template, designed to facilitate a structured response and streamline feedback collation and analysis. Respondents are encouraged to share their insights by June 5, 2024.
About the IAASB
The International Auditing and Assurance Standards Board develops auditing, assurance, related services, and quality management standards and guidance in the public interest that support consistent performance of quality engagements. Along with the International Ethics Standards Board for Accountants, the IAASB is part of the International Foundation for Ethics and Audit. The Public Interest Oversight Board oversees IAASB and IESBA activities and the public interest responsiveness of the standards. For copyright, trademark, and permissions information, please visit Permissions.