ISA 240 – The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements

10 Communication with those charged with governance

Auditor shall communicate to those charged with governance or appropriate level of management regarding their responsibilities to prevent and detect fraud.

If auditor identifies fraud or suspects it that involves management or employee having significant employee on internal control system or others that can affect financial reporting then auditor shall communicate the matter to those charged with governance.

11 Communication to regulatory authorities

As per code of conduct auditor is required to keep client’s information confidential but where legal responsibilities override this duty then auditor shall consider his responsibilities of disclosing the matters to responsible authorities if fraud is detected or suspected

12 Documenting fraud

The auditor shall document following as part of audit documentation related to fraud:

  1. Significant decisions reached during engagement team discussions
  2. Risk of material misstatement due to fraud at financial statement and assertion level
  3. Responsive procedures based on assessed risk i.e. their nature, timing and extent
  4. Evidence obtained as a result of application of responsive procedures
  5. Communication with those charged with governance, authorities, regulators etc
  6. Reasons of auditor’s conclusion that risk of material misstatement due to fraud in certain aspect of financial information is not related to engagement