The Canadian Public Accountability Board (CPAB) published its 2024 fraud thematic review, integrated into its regular inspections of all audit firms it inspects, finding that auditors have made progress but that inspection findings continue where fraud risks are not identified or sufficiently assessed and audit responses do not adequately address the risk of material misstatement due to fraud. The review emphasises the need for a more questioning mindset and stronger professional skepticism beyond baseline compliance with Canadian Auditing Standard (CAS) 240. CPAB reports increased use of forensic specialists in inspected files, rising to 11 per cent in 2024 from six per cent in 2021 and five per cent in 2019, but notes that most auditors still did not identify fraud risks beyond the two required by CAS 240, being revenue recognition and management override of controls. Work over whistleblower programmes showed some improvement in inquiries, but procedures often remained limited to confirming the programme exists rather than evaluating its design, operating effectiveness or the nature of reports received. The review also highlights situations where management identified fraud risks that auditors did not, with insufficient evidence supporting the auditor’s conclusion that these did not create a fraud-related risk of material misstatement, and identifies areas often not properly considered in risk assessments, including corruption, information technology risks and the consolidation process. On technology, CPAB expects more fraud risks linked to IT and notes that where general IT controls are not tested, audit teams need to reconsider whether audit procedures appropriately identify and address related risks, while some firms are deploying tools such as document-alteration detection and data analytics over full data populations. CPAB positions the publication, including case studies drawn from inspections, as a basis for ongoing discussions with audit firms, auditing standard setters and other regulators.
Canadian Public Accountability Board 2025-01-17
Canadian Public Accountability Board publishes 2024 fraud thematic review citing persistent gaps in auditors’ fraud risk work
The Canadian Public Accountability Board (CPAB) released its 2024 fraud thematic review, noting progress in auditor practices but persistent issues in identifying and assessing fraud risks. The review highlights the need for enhanced professional skepticism and increased use of forensic specialists, while pointing out deficiencies in addressing fraud risks beyond Canadian Auditing Standard 240. CPAB emphasizes evaluating whistleblower programmes and IT-related fraud risks, urging audit teams to improve procedures and risk assessments.