Document ID: chunk:federal_register_of_legislation:F2023C01124:reg:17:p29
Version: federal_register_of_legislation:F2023C01124
Segment Type: reg
Provision Reference: reg 17 (pt 29/41)
Character Range: 92546–95471

professional judgement and is affected by such factors as the likelihood of collusion and the nature and magnitude of the suspected fraud.  Ordinarily, the appropriate level of management is at least one level above the persons who appear to be involved with the suspected fraud.

Communication with Those Charged with Governance (Ref: Para. 42)

         Aus A62.1 Legislation may require the auditor or a member of the audit team to maintain the confidentiality of information disclosed to the auditor, or a member of the audit team, by a person regarding contraventions or possible contraventions of the law.  In such circumstances, the auditor or a member of the audit team may be prevented from communicating that information to management or those charged with governance in order to protect the identity of the person who has disclosed confidential information that alleges a breach of the law.  In such circumstances, the auditor may consider obtaining legal advice to assist in determining the appropriate course of action and may need to consider the implications for the audit engagement.

A63.         The auditor's communication with those charged with governance may be made orally or in writing.  ASA 260 identifies factors the auditor considers in determining whether to communicate orally or in writing.[29]  Due to the nature and sensitivity of fraud involving senior management, or fraud that results in a material misstatement in the financial report, the auditor reports such matters on a timely basis and may consider it necessary to also report such matters in writing.

A64.         In some cases, the auditor may consider it appropriate to communicate with those charged with governance when the auditor becomes aware of fraud involving employees other than management that does not result in a material misstatement.  Similarly, those charged with governance may wish to be informed of such circumstances.  The communication process is assisted if the auditor and those charged with governance agree at an early stage in the audit about the nature and extent of the auditor's communications in this regard.

A65.         In the exceptional circumstances where the auditor has doubts about the integrity or honesty of management or those charged with governance, the auditor may consider it appropriate to obtain legal advice to assist in determining the appropriate course of action.

Other Matters Related to Fraud (Ref: Para. 43)

A66.         Other matters related to fraud to be discussed with those charged with governance of the entity may include, for example:

           * Concerns about the nature, extent and frequency of management's assessments of the controls in place to prevent and detect fraud and of the risk that the financial report may be misstated.

           * A failure by management to appropriately address identified significant deficiencies in internal control, or to