Scope of application
- This Auditing Standard specifies and guides the auditor's responsibility and corporate auditing (hereinafter referred to as an "auditor") for fraud in the financial statement audit process. In particular, this Standard also stipulates and further guides the application of Vietnamese Standards on Auditing No. 315 and No. 330 to the risks of material misstatement due to fraud.
Features of cheating
- Errors in the financial statements can arise from fraud or error. To differentiate between fraud and error, it is important to consider whether the conduct that led to errors in the financial statements is intentional or unintentional.
- Although fraud is a very broad legal concept, in order to achieve the purpose of audit standards, the auditor must only consider frauds that lead to material misstatement of the financial statements. There are two types of intentional errors that the auditor should be concerned with: those arising from fraudulent financial reporting and misappropriation of assets. Although the auditor may suspect or in rare cases determine whether fraud has occurred, the auditor may not make a legal decision about whether a fraud is actually fraud or not. in paragraphs A1 - A6 of this Standard).
Responsibility to prevent and detect fraud
- The prevention and detection of fraud is primarily the responsibility of management and management of the audited entity. It is important that management, with management's oversight, pay special attention to fraud prevention in order to reduce the chances of fraud and detect fraud thereby convincing individuals do not commit fraud because of the possibility of detection and punishment. This responsibility includes a commitment to creating a culture of honesty and ethical behavior that can be enhanced by active oversight by the Board of Trustees. In performing its supervisory responsibility, management shall consider the possibility of an act of control or an action that improperly affects the financial reporting process, for example. management's efforts to correct business results so that analysts have incorrect understanding of the entity's performance and profitability.
Responsibilities of auditors
- When performing an audit in accordance with Vietnamese Standards on Auditing, the auditor is responsible for obtaining reasonable assurance that the financial statements, as a whole, remain material misstatement due to fraud. either confused or not. Due to the inherent limitations of the audit, there is an unavoidable risk that the auditor cannot detect some errors that materially affect the financial statements, even after the audit has been prepared. plan and comply with the Vietnamese Auditing Standards (see paragraph A51 on Vietnamese Auditing Standards No. 200).
- As mentioned in Vietnamese Standard on Auditing No. 51, paragraph A200, the effects of inherent limitations are particularly severe on errors resulting from fraud. The risk of material misstatement due to fraud is higher than the risk of material misstatement due to mistake. This is because fraud can be accomplished through sophisticated and well-organized tricks to conceal fraud, such as forging records, intentionally not recording transactions, or intentionally providing grant false explanations to auditors. Cloaking can be even more difficult to detect when collusion is involved in fraud. Collusion may lead the auditor to believe that the audit evidence is convincing when in fact it is false evidence. The auditor's ability to detect fraud depends on factors such as the culprit's skills, the frequency and extent of the manipulation, the degree of collusion, the value of the money being manipulated, the rank. of individuals committing fraud. While the auditor may be able to identify opportunities for fraud, it is difficult to identify flaws in the areas they consider, such as accounting estimates, that are caused by cheating or mistake.
- In addition, the risk of the auditor's failure to fully discover material misstatement resulting from management fraud is greater than that of the employee, because the manager regularly has the conditions to directly or indirectly manipulate accounting entries, present fraudulent financial information, or override procedures of control established to prevent similar fraudulent acts of other employees.
- To achieve reasonable assurance, the auditor shall maintain professional skepticism throughout the audit, considering the ability of management to override controls and be aware of the fact that Auditing procedures to effectively detect confusion may not be effective in detecting fraud. The requirements of this Auditing Standard are intended to assist the auditor in identifying and assessing the risks of material misstatement of fraud and to establish procedures to detect such error.
- The auditor and the firm shall comply with the requirements of this Standard in the course of performing the audit of financial statements.
The entity (the customer) and the parties using the results of the audit are required to have an understanding of the requirements in this International Standard in order to coordinate their work with the firm and the auditor, and management of the relationships related to the information that has been audited.
See full text Standard No. 240