Fraud

Fraud schemes continue to evolve. Auditors must continue to enhance their skills, processes and procedures for identifying and assessing fraud risk factors that may result in material misstatement and designing and executing appropriate audit responses.

In 2019, CPAB began its fraud thematic review, and has continued with each inspection cycle. Our reviews involve a deeper dive into the quality of work performed by auditors to identify, assess and respond to fraud risks. Many auditors are moving in the right direction in terms of improving their identification and assessment of fraud risk factors and associated procedures. While most of the audit work that we inspected in 2024 complied with the existing fraud standard, to truly provide greater protection to the investing public a more questioning mindset is needed.

The thematic reviews provided insights about how international and Canadian auditing standards that deal with an auditor’s responsibilities relating to fraud could be strengthened, enhanced and clarified in the public interest. We also engaged with forensic specialists, investors and other regulators to better understand the public’s expectations of auditors relating to fraud detection and to inform our views about good audit practices. To facilitate these ongoing discussions CPAB hosted a fraud symposium in 2023, sharing our view that further awareness of the critical role auditors play in the prevention and detection of fraud and the protection of the capital markets is needed throughout the financial reporting ecosystem. 

CPAB engaged with the International Auditing and Assurance Standards Board (IAASB) and the Canadian Auditing and Assurance Standards Board (AASB) and responded to the IAASB’s exposure draft on proposed revisions to International Standard on Auditing (ISA) 240, The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements. The revised standard was finalized with an intention to provide clearer auditor responsibilities, stronger responses to fraud risks and improved transparency in financial reporting. The standard was adopted by the AASB as Canadian Auditing Standard (CAS) 240 in 2025 and becomes effective for audits of financial statements for periods beginning on or after December 15, 2026. 

Refer to the Resources section below for more information on our thematic reviews, our 2023 audit quality symposium focused on the evolving fraud landscape, and our engagement with standard-setters.