Following several high profile cases of corporate collapse and audit failures, Sir Donald Brydon highlighted the perceived expectation gap between what an auditor can and should do in relation to fraud, and the public’s desire for the auditor to identify all such problems.

As a response to this, in May 2021, the Financial Reporting Council (FRC) published revised ISA (UK) 240 The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. The revisions aim to provide clarity about the auditor’s obligations and further guidance.

This is not a fundamental change in the auditor’s responsibilities or approach and the revisions mostly serve to clarify and formalise existing requirements. Having said that, the amendments introduce several new requirements, particularly around risk assessment.