As the audit profession waits for the final details of the government’s proposed audit reforms, the Financial Reporting Council (FRC) has issued a revision of its UK auditing standard ISA (UK) 240 on the responsibilities of auditors relating to possible fraud
The revisions to the ISA (UK) 240 (Revised May 2021) - The Auditor's Responsibilities relating to Fraud in an Audit of Financial Statements standard are designed to provide increased clarity as to the auditor's obligations, addressing the concern raised by Sir Donald Brydon in his review of the quality and effectiveness of audit. The revisions include enhancements to the requirements for the identification and assessment of risk of material misstatement due to fraud and the procedures to respond to those risks.
Brydon described ISA 240 as ‘somewhat ambiguous, in my view, contributing to a lack of clarity as to what exactly is expected of auditors in this area’.
Fraud allegations have also been at the centre of a number of high profile audit failures in recent years from Carillion to Patisserie Valerie which are currently under investigation by the FRC.
