Auditing Standards Board proposes a new fraud standard

The AICPA Auditing Standards Board (ASB) issued for public comment a proposed standard addressing the auditor’s responsibilities relating to fraud.

The ASB voted in May to issue the exposure draft of Statement on Auditing Standards (SAS), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. Stakeholders have until Oct. 3 to provide feedback on the proposal.

If issued as final, the proposed SAS would supersede SAS No. 122, Statements on Auditing Standards: Clarification and Recodification,as amended, Section 240, Consideration of Fraud in a Financial Statement Audit (AU-C Section 240), and would amend a lengthy list of SASs that make mention of fraud.

“This exposure draft doesn’t alter the overall objectives of the auditor when fraud or suspected fraud is identified,” Jennifer Burns, CPA, the AICPA’s chief auditor, said in a news release. “What it does is strengthen and clarify the auditor’s specific role in these circumstances. Management, those charged with governance, and auditors all have important responsibilities, and when everyone diligently executes those responsibilities, an organization is best positioned to identify fraud.”

The ASB’s Fraud Task Force has worked to identify areas in which AU-C Section 240 could be enhanced to further consider the implications when an auditor identifies fraud or suspected fraud in an audit of financial statements. When developing the proposed SAS, the ASB considered ISA 240 (Revised),The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, a final standard issued by the International Auditing and Assurance Standards Board in March.

The ASB believes the proposed SAS will help auditors perform appropriate audit procedures when fraud or suspected fraud is identified in an audit of financial statements and will drive auditors to better exercise professional skepticism in planning and performing their audits with respect to identifying, assessing, and responding to risks of material misstatement due to fraud, thereby improving audit quality.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.