SA 240 A Quick Recap

SA-240 (Revised)
Auditors Responsibilities in relation to fraud in and audit of F.S. (5 Min Quick Revision)

– As per SA, Prescribes auditors Responsibilities in relation to fraud in an audit of Financial Statement.

– Fraud refers to an intentional act done by one or more individual among TCWG, Management, Employees or third parties involving the us le of deception to obtain an unjust or illegal advantages.

– Primarily, It is the responsibility of the management regarding prevention, detection and correction of the materials frauds in the financial statements.

– Auditor is responsible in realtion to those frauds which may have material effect on the true & fair view of financial statements.

– Auditor can not be held responsible for all the material frauds in the financial statements because detection risk is generally high in relation to fraud .

– The auditor shall perform RMM to identify and assess the risk of material frauds in the financial statements and these are -:
a) Observation
b) Inspection
c) Inquiry with management
d) Inquiry with TCWG
e) Discuss with engagement team.

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– If on the basis of audit procedures performed the auditor identify material frauds then he shall communicate these material frauds to TCWG of the entity on timely basis.

– If auditor identify many material frauds in the financial statements then auditor shall determine either to continue or withdraw from the engagement.

– If after submission of audit report any material frauds is identified which was not detected by the auditor then auditor cannot be held responsible for such non-detection of fraud but auditor has to prove that he has conducted is engagement in accordance with basic principles for governing the audit and he must have sufficient and appropriate documentation.

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