The key changes proposed in the IAASB’s Exposure Draft (ED) ISA 240 (Revised) The auditor’s responsibilities relating to fraud in an audit of financial statements are:

• Defining the expectations in relation to fraud,
• Delineating more robust procedures, and
• Increasing transparency about the auditors’ responsibilities and fraud-related procedures in the auditor’s report.

In our joint submission with the ACCA we agree with many of the proposed revisions, however we do question whether the proposals would achieve the intended outcome.

The area that we have received the most feedback on is the introduction of a specific subset of key audit matters (KAMs) for matters related to fraud. We do not support the proposal due to several concerns, including the risk it will further increase the expectation gap. In our view this should be an ecosystem approach, in particular, a corresponding responsibility for directors to report on their actions when it comes to fraud.

Clarity in relation to auditor’s responsibilities relating to fraud in an audit of financial statements is a key public interest issue and one of the main causes of the audit expectation gap.