Document ID: chunk:federal_register_of_legislation:F2023C01124:reg:17:p21
Version: federal_register_of_legislation:F2023C01124
Segment Type: reg
Provision Reference: reg 17 (pt 21/41)
Character Range: 69698–72908

misstatement due to fraud generally includes the consideration of how the overall conduct of the audit can reflect increased professional scepticism, for example, through:

           * Increased sensitivity in the selection of the nature and extent of documentation to be examined in support of material transactions.

           * Increased recognition of the need to corroborate management explanations or representations concerning material matters.

    It also involves more general considerations apart from the specific procedures otherwise planned; these considerations include the matters listed in paragraph 29, which are discussed below.

Assignment and Supervision of Personnel (Ref: Para. 30(a))

A35.         The auditor may respond to identified risks of material misstatement due to fraud by, for example, assigning additional individuals with specialised skill and knowledge, such as forensic and IT experts, or by assigning more experienced individuals to the engagement.

    A36.         The extent of supervision reflects the auditor's assessment of risks of material misstatement due to fraud and the competencies of the engagement team members performing the work.

Unpredictability in the Selection of Audit Procedures (Ref: Para. 30(c))

A37.         Incorporating an element of unpredictability in the selection of the nature, timing and extent of audit procedures to be performed is important as individuals within the entity who are familiar with the audit procedures normally performed on engagements may be more able to conceal fraudulent financial reporting.  This can be achieved by, for example:

           * Performing substantive audit procedures on selected account balances and assertions not otherwise tested due to their materiality or risk.

           * Adjusting the timing of audit procedures from that otherwise expected.

           * Using different sampling methods.

           * Performing audit procedures at different locations or at locations on an unannounced basis.

Audit Procedures Responsive to Assessed Risks of Material Misstatement Due to Fraud at the Assertion Level (Ref: Para. 31)

A38.         The auditor's responses to address the assessed risks of material misstatement due to fraud at the assertion level may include changing the nature, timing and extent of audit procedures in the following ways:

           * The nature of audit procedures to be performed may need to be changed to obtain audit evidence that is more reliable and relevant or to obtain additional corroborative information.  This may affect both the type of audit procedures to be performed and their combination.  For example:

                   + Physical observation or inspection of certain assets may become more important or the auditor may choose to use computer‑assisted audit techniques to gather more evidence about data contained in significant accounts or electronic transaction files.

                   + The auditor may design procedures to obtain additional corroborative information.  For example, if the auditor identifies that management is under pressure to meet earnings expectations, there may be a related risk that management is inflating sales