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The IAASB has released on exposure draft on Auditor Responsibilities for Fraud in auditing financial statements, with comments due by June 5. In response, the AASB has released a similar exposure draft proposing the adoption of the IAASB proposals. Comments are due on the AASB ED by May 6.

The issue of auditor responsibiity for fraud has been an issue in the profession for a hundred years or more. Several legal cases  took place in the early 20th century searching for an answer, and like the Kingston Cotton Mill case, offering one. However, now there is no easy yes/no answer to the question. Business systems and business itself have grown immensely more complex, and still, of course, changing quickly.

It's clear that there is a responsibiity under existing standards in particular to follow the standards that pertain to fraud, such as responsibility to discuss the possibility of fraud with the audit team and the client, to evaluate the contol sysems the client has in place to mitigate fraud, and to ask the necessary questons and carefully evaluate the responses with professional scepticism. it's this risk assessment that is often the sticking point. It's difficult and rendered even more difficult when management lies or misleads.

AI will be helpful when the tools mature. Already there are GenAI tools available to help with Risk Management, But change is going to move on unabated and new challenges will arise with the change. So there's a pretty good chance we (or our succcessors) will be discussing the auditor responsibility question in another hundred years. In the meantime, it is good to respond to the ED and provide your input. Relevant links can be found in the latest FRAS Update, which is available here.