Skip to content

ACCA Strategic Professional · Advanced Audit and Assurance (International) · Fraud and error

During planning for Kestrel Co, the audit senior proposes that, because the directors are long-standing and trusted, discussion of fraud risk among the team is unnecessary. Which response is consistent with ISA 240?

The proposal should be rejected. ISA 240 requires the engagement team to discuss where the financial statements may be susceptible to material fraud and to maintain professional scepticism, regardless of belief in management's honesty. This applies to all audits, not just listed entities.

  1. AAgree, since trust in management reduces the need for fraud risk discussion
  2. BAgree, provided the engagement partner alone considers fraud risks
  3. CReject the proposal, as the engagement team must discuss the susceptibility of the financial statements to material fraud, maintaining professional scepticismCorrect
  4. DReject the proposal, but only for listed entity audits

Explanation

ISA 240 requires members of the engagement team to discuss how and where the financial statements may be susceptible to material misstatement due to fraud, and requires professional scepticism regardless of past experience of management's honesty. The requirement applies to all audits within ISA scope, not only listed entities, and is not delegated solely to the partner.

Did you get it right without looking?

One question tells you little. A timed set on Fraud and error shows your real accuracy, how long you take and where you lose marks.

Practise Fraud and errorFree diagnostic mock

More Fraud and error questions