Question

What do auditing standards require of the auditor regarding the assessment of material misstatement due to fraud?

Answer 1

Auditing standards require that auditor’s document the below mentioned matters for the auditor’s consideration on material misstatements due to fraud:

--Important decisions made during the discussion among engagement team personnel in planning the audit in regard to the susceptibility of financial statements of the entity’s to material fraud, inclusive of when and how the discussion occurred and who participated.

--Procedures performed to obtain the necessary information for the identification and assessment of the risks of material fraud.

--Specific risks related to material fraud that was identified at both the assertion level and the overall financial statement level; and auditor’s description in responses to those risks.

--Supporting reasons on a conclusion that there is not any big risk of material improper revenue recognition.

-- Analytical relationships and other conditions showing that additional auditing procedures or other responses were needed, and the actions performed by the auditor.

--Results of the procedures under-taken to address the risk of management override of controls

--The nature of communications about fraud informed to the audit committee, management, or others