Responsibilities of the auditor for detecting material misstatements due to fraud

1. An auditor conducting an audit in accordance with PSAs obtains reasonable assurance that the

financial statements taken as a whole are free from material misstatement, whether caused by

fraud or error

2. An auditor cannot obtain absolute assurance that material misstatements in the financial

statement will be detected because of such factors as of the following:

● use of judgment

● use of testing

● inherent limitations of internal control

● the fact that much of the audit evidence available to the auditor is persuasive

rather than conclusive in nature

3. The auditor should maintain an attitude of professional skepticism throughput the audit,

recognizing the possibility that a material misstatement due to fraud could exist,

notwithstanding the auditor’s past experience with the entity about the honesty and integrity of

management and those charged with governance

4. Members of the engagement team should discuss the susceptibility of the entity’s financial

statements to material misstatement due to fraud

5. Risk assessment procedures

The auditor should perform risk assessment procedures to obtain an understanding of

the entity and its environment, including its internal control. As part of this work, the

auditor performs the following procedures to obtain information that is used to identify

the risks of material misstatements due to fraud:

1. Makes inquiries of management, of those charged with governance, and of others

within the entity as appropriate and obtains an understanding of how those charged

with governance exercise oversight of management’s processes for identifying and

responding to the risks of fraud and he internal control that management has

established to mitigate these risks

2. Considers whether one or more fraud risk factors are present

3. Considers any unusual or unexpected relationships that have been identified in

performing analytical procedures

4. Considers other information that may be helpful in identifying the risks of material

misstatement due to fraud.

Responses to the risks of material misstatement due to fraud

1. The auditor should determine overall responses to address he assessed risks of material

misstatement due to fraud at the financial statement level and should design and perform further

audit procedures whose nature, timing and extent are responsive to the assessed risks at the

assertion level

2. In determining overall responses to address the risks of material misstatement due to fraud at the

financial statement level the auditor should:

● Consider the assignment and supervision of personnel

● Consider the accounting policies used by the entity; and

● Incorporate an element of unpredi