The revisions affect ISA (UK) 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, and ISA (UK) 570 Going Concern. The overhaul of the standards is the result of a long line of major corporate collapses where auditors were hauled up before the regulator over auditor misconduct and failure to identify serious issues with going concern, exacerbated by a lack of scepticsm and management challenge.

The revisions to ISA 240 strengthen and clarify auditors’ responsibilities in relation to fraud, including enhanced risk assessment procedures and greater transparency in audit reporting, particularly for audits of publicly traded entities.

The standard clarifies that auditors must ‘plan and perform the audit to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement due to fraud’.

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