Where a significant fraud has occurred or the fraud is committed by those charged with governance, the auditor should consider the necessity for a disclosure of the fraud in the financial statements. If adequate disclosure is not made the auditor should consider the necessity for a suitable disclosure in his report.
Documentation
The auditor should document fraud risk factors identified as being present during the auditor’s assessment process and document the auditor’s response to any such factors. If during the performance of the audit, fraud risk factors are identified that cause the auditor to believe that additional audit procedures are necessary, the auditor should document the presence of such risk factors and the auditor’s response to them.
The auditor must document matters which are important in providing evidence to support the audit opinion, and the working papers must include the auditor’s reasoning on all significant matters which require the auditor’s judgment, together with the auditor’s conclusion thereon. Because of the importance of fraud risk factors in the assessment of the inherent or control risk of material misstatement, the auditor documents fraud risk factors identified and the response considered appropriate by the auditor.