Page 28 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori
3B. Cannot be Ranked: Fraud risk factors cannot be easily ranked in terms of importance due to their varying
significance.

(CNO-SA240.300) Maintaining Professional Skepticism
1. Maintain Professional Skepticism: The auditor must maintain professional skepticism throughout the audit,
acknowledging the potential for material misstatement due to fraud, regardless of previous experiences of the
honesty and integrity with entity's management and governance.
2A. No reason to be suspicious: Unless the auditor has reason to believe the contrary, the auditor may accept
records and documents as genuine.
2B. Reasons to be suspicious: However, if there are signs during the audit that suggest a document may not be
authentic or has been altered without disclosure, further investigation is required.
If responses to enquiries from management or those charged with governance are inconsistent, the auditor shall
investigate these inconsistencies.

(CNO-SA240.320) Discussion among the engagement team
Potential fraud risks: The team should discuss potential fraud risks, regardless of the perceived honesty of the
management governance. The engagement team should closely examine the financial statements to identify areas
where fraud could potentially occur and understand how it might happen.

(CNO-SA240.340) Risk assessment procedures and related activities be geared towards obtaining
information for use in identifying risk of material misstatement due to fraud
(Shortcut: ITIFAq)
1A. Inquiries: The auditor should conduct inquiries with the management and others within the entity to
identify potential risks of material misstatement due to fraud.
1B. TCWG Oversight: Understanding how those charged with governance oversee management's processes for
identifying and responding to fraud risks.
1C. Internal Control Evaluation: Assessment of the internal control systems established by management to
mitigate fraud risks.
2. Fraud Risk Factors: The auditor should evaluate if the information obtained from other risk assessment
procedures indicates the presence of one or more fraud risk factors.
3. Analytical Procedures: Evaluation of unexpected relationships identified through analytical procedures,
which may indicate risks of material misstatement due to fraud.

(CNO-SA240.360) Responses to the assessed risks of material misstatement due to fraud at the financial
statement level
(Shortcut: Personnel from USA)
In determining overall responses to address the assessed risks of material misstatement due to fraud at the
financial statement level, the auditor shall:
Unpredictability in Audit Procedures: An element of unpredictability should be incorporated by the auditor
in selecting the nature, timing, and extent of audit procedures. This approach ensures that the audit process is
not easily anticipated or manipulated, enhancing the effectiveness of fraud detection.
Personnel Assignment and Supervision: The auditor should assign and supervise individuals with appropriate
knowledge, skills, and abilities for significant engagement responsibilities, & also for assessed risks of material
misstatement due to fraud.
Evaluation of Accounting Policies: The auditor needs to evaluate the entity's selection and application of
accounting policies, especially those related to subjective measurements and complex transactions. This

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