Document ID: chunk:federal_register_of_legislation:F2023C00341:reg:4:p20
Version: federal_register_of_legislation:F2023C00341
Segment Type: reg
Provision Reference: reg 4 (pt 20/42)
Character Range: 65234–68391

of fraud is likely.

           * Whether there are particular components for which a risk of fraud is likely.

           * How those charged with governance of the group monitor group management's processes for identifying and responding to the risks of fraud in the group, and the controls group management has established to mitigate these risks.

           * Responses of those charged with governance of the group, group management, appropriate individuals within the internal audit function (and if considered appropriate, component management, the component auditors, and others) to the group engagement team's enquiry whether they have knowledge of any actual, suspected, or alleged fraud affecting a component or the group.

Discussion among Group Engagement Team Members and Component Auditors Regarding the Risks of Material Misstatement of the Group Financial Report, Including Risks of Fraud (Ref: Para. 17)

A28.         The key members of the engagement team are required to discuss the susceptibility of an entity to material misstatement of the financial reports due to fraud or error, specifically emphasising the risks due to fraud.  In a group audit, these discussions may also include the component auditors.[19]  The group engagement partner's determination of who to include in the discussions, how and when they occur, and their extent, is affected by factors such as prior experience with the group.

A29.         The discussions provide an opportunity to:

           * Share knowledge of the components and their environments, including group‑wide controls.

           * Exchange information about the business risks of the components or the group.

           * Exchange ideas about how and where the group financial report may be susceptible to material misstatement due to fraud or error, how group management and component management could perpetrate and conceal fraudulent financial reporting, and how assets of the components could be misappropriated.

           * Identify practices followed by group or component management that may be biased or designed to manage earnings that could lead to fraudulent financial reporting, for example revenue recognition practices that do not comply with the applicable financial reporting framework.

           * Consider known external and internal factors affecting the group that may create an incentive or pressure for group management, component management, or others to commit fraud, provide the opportunity for fraud to be perpetrated, or indicate a culture or environment that enables group management, component management, or others to rationalise committing fraud.

           * Consider the risk that group or component management may override controls.

           * Consider whether uniform accounting policies are used to prepare the financial information of the components for the group financial reports and, where not, how differences in accounting policies are identified and adjusted (where required by the applicable financial reporting framework).

           * Discuss fraud that has been identified in components, or information that indicates existence of