Page 52 - AAA Integrated Workbook STUDENT S18-J19

Chapter 43 4

2.2 Responsibilities in respect of fraud and error

Directors Auditors

 Primary responsibility for the  Obtain reasonable assurance that
prevention and detection of fraud the financial statements, taken as a
whole, are free from material
 Implement an effective system of misstatement, whether caused by
internal control fraud or error

 Create a culture of honesty, ethical  Maintain an attitude of professional
behaviour, and active oversight by scepticism
those charged with governance
 Consider any incentives to commit
 Consider the need for an internal fraud
audit department to act as a
deterrent for fraud  Discuss among the engagement
team, the client's susceptibility to
fraud

 Identify and assess the risks of
material misstatement due to fraud

 Enquire how management
assesses and responds to the risk
of fraud

 Enquire of the client if they are
aware of any actual or suspected
fraudulent activity

There is an unavoidable risk that some material misstatements may not be detected
even if properly planned in accordance with ISAs as fraud is likely to be concealed.

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