Improving transparency in the auditor’s report
As users of financial statements have expressed their interest in fraud-related matters, the auditor’s report will provide more information on these matters. This enhanced transparency aims to clarify management’s and the auditor’s responsibilities, as well as procedures, which relate to fraud in an audit of financial statements.
What’s new?
Auditor’s reports of listed entities will have greater transparency by requiring the auditor to include key audit matters (KAM) relating to fraud. KAMs are, in the auditor’s professional judgment, most significant when auditing financial statements of the current period. KAMs are selected from matters communicated with those charged with governance. KAMs related to fraud may include, for example:
- identified and assessed risks of material misstatement due to fraud;
- identification of fraud or suspected fraud; and
- identification of significant deficiencies in internal control that are relevant to the prevention and detection of fraud.
In the audit of a complete set of general-purpose financial statements for a listed entity, it may be rare that the auditor would not determine at least one KAM related to fraud. However, in certain limited circumstances, the auditor may determine that there are no KAMs related to fraud.
One of the objectives of the Auditing and Assurance Standards Board’s (AASB) ED-CAS 240 outreach is to obtain feedback on the understandability and usefulness of KAMs related to fraud. Tell us what you think of the changes in the auditor’s report!
See the proposed auditor’s report here.
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