ISSAI 1240

ISSAI 1240
ISA 240
THE AUDITOR’S RESPONSIBILITIES RELATING TO
FRAUD IN AN AUDIT OF FINANCIAL STATEMENTS
obtained during the audit, the auditor shall evaluate whether the business
rationale (or the lack thereof) of the transactions suggests that they may
have been entered into to engage in fraudulent financial reporting or to
conceal misappropriation of assets. (Ref: Para. A48)
33. The auditor shall determine whether, in order to respond to the identified risks of
management override of controls, the auditor needs to perform other audit
procedures in addition to those specifically referred to above (that is, where there
are specific additional risks of management override that are not covered as part
of the procedures performed to address the requirements in paragraph 32).
Evaluation of Audit Evidence (Ref: Para. A49)
34. The auditor shall evaluate whether analytical procedures that are performed
near the end of the audit, when forming an overall conclusion as to whether the
financial statements are consistent with the auditor’s understanding of the
entity, indicate a previously unrecognized risk of material misstatement due to
fraud. (Ref: Para. A50)
35. If the auditor identifies a misstatement, the auditor shall evaluate whether such
a misstatement is indicative of fraud. If there is such an indication, the auditor
shall evaluate the implications of the misstatement in relation to other aspects
of the audit, particularly the reliability of management representations,
recognizing that an instance of fraud is unlikely to be an isolated occurrence.
(Ref: Para. A51)
36. If the auditor identifies a misstatement, whether material or not, and the auditor
has reason to believe that it is or may be the result of fraud and that
management (in particular, senior management) is involved, the auditor shall
reevaluate the assessment of the risks of material misstatement due to fraud
and its resulting impact on the nature, timing and extent of audit procedures to
respond to the assessed risks. The auditor shall also consider whether
circumstances or conditions indicate possible collusion involving employees,
management or third parties when reconsidering the reliability of evidence
previously obtained. (Ref: Para. A52)
37. If the auditor confirms that, or is unable to conclude whether, the financial
statements are materially misstated as a result of fraud the auditor shall
evaluate the implications for the audit. (Ref: Para. A53)
Auditor Unable to Continue the Engagement
38. If, as a result of a misstatement resulting from fraud or suspected fraud, the
auditor encounters exceptional circumstances that bring into question the
auditor’s ability to continue performing the audit, the auditor shall:
(a)
Determine the professional and legal responsibilities applicable in the
circumstances, including whether there is a requirement for the auditor
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246 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements