Article in March 2009

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What you people think that article in March 2009 about ISA 240 ( Redreafted )

Will scenerio can be expected in exams? :biggrin:


Discuss this with all to help each other

[KayPee]

This is a sure banker.There will certainly be a question on ISA 240.

[KayPee]

We could have a question like this:The role of the auditor as that of 'watchdog,not a bloodhound' is no longer valid in the concept of the requirements of redrafted and revised ISAs discuss

[KayPee]

I just read the article and it looks like in a bid to answer a question on Fraud which is championed by the ISA 240(redrafted) you cannot afford to leave out these other ISAs below:


ISA 260 Communication of Audit Matters to those Charged with Governance.
ISA 315 Obtaining an Understanding of the Entity and the Environment in which it Operates.
ISA 330 The Auditor’s Procedures in Response to Assessed Risk.
ISA 520 Analytical Procedures.
ISA 540 Auditing Accounting Estimates.

[KayPee]

I picked this from Pass Magazine.

20/04/2009
KPMG faces £692m negligence lawsuit

Firm hit with massive claim By PASS editorial
''KPMG has been hit with a massive £692m lawsuit over claims its 'grossly negligent audits' brought about the collapse of New Century Financial, a top sub-prime mortgage lender, which in turn precipitated the US housing crisis.

Its debtors said: 'As New Century's auditor, KPMG failed its public watchdog duty.

KPMG has defended it work, adding: 'We will vigorously defend our audit work.'

The case seems set to be just the first in a series as the hunt begins into who is to blame for the billions of pounds lost in mortgage-linked securities - at the heart of the global financial crisis''.(PASSMAGAZINE)


These issues of credit crunch and sub-prime mortgages have been in the news for almost 2 years now. I will therefore entreat everyone to read that article in the SA(on the ISA 240(redrafted) critically and any other issues/articles that are related to fraud and error and their resultant corporate failures the consequence.

The ISA 240(redrafted)-[I]At least that's the import I get from the article .Auditors are being asked to move away from their traditional monitoring(watch dog) approach to a requirement for alertness to detect fraud(this form of alertness needs the keen sense of smell of a bloodhound and not a watchdog)

The article concluded that, to describe the audit role as that of a ‘watchdog, not a 'bloodhound' is no longer valid in the context of the requirements of the redrafted and revised ISAs
ISAs like 240 negate the traditional passive philosophical approach towards auditor responsibility for fraud detection, making a significant shift away from a ‘monitoring’ role and towards the requirement for a very keen 'sense of smell’ i.e some alertness coupled with some Professional Skepticism to be able to detect fraud