Auditing and Assurance Standards and Guidance

Auditing Standards (Ireland)

FRC ISAs (UK and Ireland) applicable for periods beginning on or after 15 December 2010 but before 17 June 2016

ISA (UK and Ireland) 240 The auditor's responsibilities relating to fraud in an audit of financial statements

Application and Other Explanatory Material

Evaluation of Audit Evidence (Ref: Para. 34-37 )

Consideration of Identified Misstatements (Ref: Para. 35-37 )

Since fraud involves incentive or pressure to commit fraud, a perceived opportunity to do so or some rationalization of the act, an instance of fraud is unlikely to be an isolated occurrence. Accordingly, misstatements, such as numerous misstatements at a specific location even though the cumulative effect is not material, may be indicative of a risk of material misstatement due to fraud.

A52.

The implications of identified fraud depend on the circumstances. For example, an otherwise insignificant fraud may be significant if it involves senior management. In such circumstances, the reliability of evidence previously obtained may be called into question, since there may be doubts about the completeness and truthfulness of representations made and about the genuineness of accounting records and documentation. There may also be a possibility of collusion involving employees, management or third parties.

A53.	ISA (UK and Ireland) 450²⁰ and ISA (UK and Ireland) 700²¹ establish requirements and provide guidance on the evaluation and disposition of misstatements and the effect on the auditor's opinion in the auditor's report.

²⁰ ISA (UK and Ireland) 450, "Evaluation of Misstatements Identified during the Audit."

²¹ ISA 700, "Forming an Opinion and Reporting on Financial Statements."

The APB has not promulgated ISA 700 as issued by the IAASB for application in the UK and Ireland. In the UK and Ireland the applicable auditing standard is ISA (UK and Ireland) 700, "The Auditor's Report on Financial Statements." Paragraph 8(b) of ISA (UK and Ireland) 700 requires evaluation of whether uncorrected misstatements are material, individually or in aggregate.