Document ID: chunk:federal_register_of_legislation:F2023C01124:reg:17:p16
Version: federal_register_of_legislation:F2023C01124
Segment Type: reg
Provision Reference: reg 17 (pt 16/41)
Character Range: 55714–58863

A consideration of any allegations of fraud that have come to the auditor's attention.

           * A consideration of the risk of management override of controls.

Risk Assessment Procedures and Related Activities

Enquiries of Management

Management's Assessment of the Risk of Material Misstatement Due to Fraud (Ref: Para. 18(a))

A13.         Management accepts responsibility for the entity's internal control and for the preparation of the entity's financial report.  Accordingly, it is appropriate for the auditor to make enquiries of management regarding management's own assessment of the risk of fraud and the controls in place to prevent and detect it.  The nature, extent and frequency of management's assessment of such risk and controls may vary from entity to entity.  In some entities, management may make detailed assessments on an annual basis or as part of continuous monitoring.  In other entities, management's assessment may be less structured and less frequent.  The nature, extent and frequency of management's assessment are relevant to the auditor's understanding of the entity's control environment.  For example, the fact that management has not made an assessment of the risk of fraud may in some circumstances be indicative of the lack of importance that management places on internal control.

Considerations specific to smaller entities

A14.         In some entities, particularly smaller entities, the focus of management's assessment may be on the risks of employee fraud or misappropriation of assets.

Management's Process for Identifying and Responding to the Risks of Fraud (Ref: Para. 18(b))

A15.         In the case of entities with multiple locations, management's processes may include different levels of monitoring of operating locations, or business segments.  Management may also have identified particular operating locations or business segments for which a risk of fraud may be more likely to exist.

Enquiry of Management and Others within the Entity (Ref: Para. 18)

A16.         The auditor's enquiries of management may provide useful information concerning the risks of material misstatements in the financial report resulting from employee fraud.  However, such enquiries are unlikely to provide useful information regarding the risks of material misstatement in the financial report resulting from management fraud.  Making enquiries of others within the entity may provide individuals with an opportunity to convey information to the auditor that may not otherwise be communicated.

A17.         Examples of others within the entity to whom the auditor may direct enquiries about the existence or suspicion of fraud include:

           * Operating personnel not directly involved in the financial reporting process.

           * Employees with different levels of authority.

           * Employees involved in initiating, processing or recording complex or unusual transactions and those who supervise or monitor such employees.

           * In‑house legal counsel.

           * Chief ethics officer or equivalent person.

           * The person or persons charged with dealing with