Crossing International Standards on Auditing 240 “The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements” and 570 “Going Concern”: New Requirements

Abstract

The article reveals the latest amendments in the International Standards on Auditing 240 “The Auditor’s Responsibilities Relating to Fraud in Audit of Financial Statements” and 570 “Going Concern”, to be enforced in December 2026 as a response on the growing risks of fraud and the increasing uncertainties regarding the ability of business entities to continue operation on an ongoing basis. It is emphasized that the developers of these standards have accounted for the contingencies – military conflicts, disruptions of supply chains, pandemic-related restrictions – increasing the probability of material distortions in the financial statements due to fraudulent actions and violations of the ongoing concern principle by business management staff. Principle amendments and supplements to ISA 240 are designed to enhance the role and responsibility of the auditor, especially the engagement partner, in detecting fraud, and to reinforce the professional skepticism; they include extended procedures for assessing risks of distortions in financial statements due to fraud, e.g. the procedures for assessing programs for protection of informers / exposers of fraudulent actions, further procedural support for use of communications in time of audit, and auditor’s reporting. ISA 570 has been subject to core amendments, to ensure a new approach to assessment of the material uncertainty of the ongoing concern, which includes a scrutiny of: events affecting the ongoing concern, risks related with using the ongoing concern principle by business management staff; management’ plans on future actions, including assessment procedures; dates (terms) of the beginning of the period of assessing the ongoing concern, time span of performing such assessment; ways of the management staff’s assessment of the business entity’s ability to continue operation on an ongoing basis; communications with management staff and written assurances, communications with external parties; using the principle of professional skepticism by the auditors. The revised ISA 240 and ISA 570 have kin features, e.g., the introduced principles of scaling, enhanced procedures for risk assessment, enhanced requirements for communications with management staff and top executive persons, and with external users; provisions on quality control at engagement level, and guidelines on enhancing the transparence of the auditor’s report. The disclosure of core amendments and the phased employment of ISA 570 requirements is supposed to enable the auditors to timely prepare to the implementation of the revised standards that are going to be compulsory at the end of 2026. Further studies will focus on developing procedural support and documentary implementation of the revised requirements in the auditing practice.