Proposed Amendments to Canadian Auditing Standard (CAS) 240

From the Auditing and Assurance Standards Board

AASB Exposure Draft – Proposed Amendments to Canadian Auditing Standard (CAS) 240, The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements

Summary

High-quality audits support the smooth functioning of capital markets. The public interest is best served when everyone in the financial reporting system has confidence in audits. In recent years, high-profile international corporate failures and significant accounting restatements have put a spotlight on those involved in the preparation, approval, audit, analysis, and use of financial reports, particularly in the area of fraud.

The IAASB has now issued an Exposure Draft of International Standard on Auditing (ISA) 240 (Revised), The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements, and the related conforming and consequential amendments. In addition, the IAASB’s Exposure Draft also includes an Explanatory Memorandum, which provides background to, and an explanation for, the proposed revisions to extant ISA 240.

The AASB plans, subject to comments received following exposure, to adopt proposed ISA 240 (Revised) and the proposed conforming and consequential amendments to other ISAs. The result would be revised respective Canadian Auditing Standards (CASs).

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The IAASB’s Exposure Draft, “Proposed International Standard on Auditing (ISA) 240 (Revised), The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements (ED-ISA 240), ” is available on the IAASB website.

In addition to the text of proposed ISA 240, the IAASB's Exposure Draft includes an Explanatory Memorandum, which provides background to, and an explanation for, the proposed revisions to extant ISA 240.

What You Need to Know about Changes to the Fraud Audit Standard

What’s changing?

High-quality audits support the smooth functioning of capital markets. The public interest is best served when everyone in the financial reporting system has confidence in audits. In recent years, high-profile international corporate failures and significant accounting restatements have put a spotlight on those who are involved in the preparation, approval, audit, analysis, and use of financial reports, particularly in the area of fraud. Because of this, the International Auditing and Assurance Standards Board (IAASB) is revising International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. In Canada we adopt these international standards as Canadian Auditing Standards (CAS) – so any changes made to the ISAs will apply to audits in Canada as well.

The changes will:

• be clear on the auditor’s responsibilities about fraud in financial statement audits;
• strengthen the auditor’s procedures; and 
• include more detail about fraud in the auditor’s report. 

These changes apply to all financial statement audits.

Not all the current requirements of CAS 240 are changing – in some cases, application material or examples have been enhanced or added.

Learn about the key changes below. A detailed explanation of all the changes is included in the IAASB’s Explanatory Memo.

If you’re a practitioner, management, those charged with governance or a financial statement user, see how the changes impact you!