Fraud is described in auditing standards as “an intentional act by one or more individuals among management, those charged with governance, employees, or third parties, involving the use of deception to obtain an unjust or illegal advantage.”
In recent years, high-profile international corporate failures and significant accounting restatements have put a spotlight on participants in the financial reporting ecosystem who are involved in the preparation, approval, audit, analysis, and use of financial reports, particularly in the area of fraud. This has led to a project to revise Canadian Auditing Standard (CAS) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements.
The objectives of the project are to:
- clarify the role and responsibilities of the auditor for fraud in an audit of financial statements;
- promote consistent behaviour and facilitate effective responses to identified risks of material misstatement due to fraud through strengthening CAS 240 to establish more robust requirements and clarify application material where necessary;
- enhance CAS 240 to reinforce the importance, throughout the audit, of the appropriate exercise of professional skepticism in fraud-related audit procedures; and
- enhance transparency on fraud-related procedures where appropriate, including strengthening communications with those charged with governance and the reporting requirements in CAS 240 and other relevant CASs.