IFAC Responds to IAASB Discussion Paper on Fraud and Going Concern

IFAC has submitted its response to the IAASB Discussion Paper Fraud and Going Concern in an Audit of Financial Statements. IFAC supports the IAASB’s focus on addressing the issues and challenges related to fraud and going concern in audits of financial statements. We strongly agree that all those in the financial reporting ecosystem involved in the preparation, approval, audit, analysis and use of financial reports have an essential role in contributing to high-quality financial reporting. In general, we believe that ISA 240 and ISA 570 (Revised) provide an effective basis for dealing with the auditor’s responsibilities relating to fraud and going concern in an audit of financial statements and do not require far-reaching changes. In general, we consider the IAASB’s focus should be on:

• Providing leadership and initiatives focused on audit as a valued service and narrowing the expectation gap (“knowledge gap”). One of the key public interest roles for the IAASB is to be open and transparent to stakeholders about the realities of what an audit can achieve and what it cannot under the current model, given the constraints in terms of time and cost.
• Taking an evidence-based approach to changes to the ISAs and ensuring they remain both principle and risk-based and retain the alignment with requirements under the applicable financial reporting framework.  
• Exploring the need for (and potential development of) assurance standards for (voluntary or required in some jurisdictions) assurance engagements that could focus on the detection of fraud or going concern issues, in addition to the audit.