Skip to content

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

During planning of the audit of Zenith Retail Ltd, the engagement team discusses how the financial statements might be susceptible to material misstatement due to fraud. Under ISA 240, which statement about this discussion is correct?

The ISA 240 fraud discussion should involve the engagement team and be conducted with professional scepticism, setting aside any prior belief that management is honest and has integrity. It is required on every audit, because team members need to understand fraud risks to design appropriate procedures.

  1. AIt should be held only among the partner and manager, to avoid tipping off junior staff
  2. BIt should be held with the engagement team members and should set aside any belief that management is honest and has integrityCorrect
  3. CIt is required only where the entity is listed or the prior year audit identified fraud
  4. DIt should focus on misstatements from error rather than fraud, because fraud is the responsibility of management

Explanation

ISA 240 requires the engagement team to discuss the susceptibility of the financial statements to material misstatement due to fraud, emphasising professional scepticism and setting aside prior beliefs about management's honesty. The discussion applies to all audits, not only listed entities. Limiting it to senior staff is wrong because team members need the information to design and perform procedures.

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