SESSION 1: Fraud Risk Fundamentals in Audits: Responsibilities, Red Flags and Modern Risks
This session introduces auditors to their responsibilities regarding fraud under ISA 240 and the Auditing Profession Act. It unpacks fraud concepts, fraud risk factors and planning procedures. With technology-driven fraud increasing, the session also explores how IT environments and emerging AI tools impact fraud risk, internal controls and audit procedures.
This foundation session explains the definition and characteristics of fraud, the fraud risk triangle and fraud schemes commonly encountered in audits. It explores ISA requirements for professional skepticism, engagement team discussions and fraud risk assessment. The session includes modern fraud trends such as cyber-enabled fraud, data manipulation and AI-generated financial misstatements, showing how weak IT controls elevate fraud risk.
Key Topics Covered:
• Definition of fraud: fraudulent reporting vs asset misappropriation
• Fraud Risk Triangle – pressure, opportunity, rationalisation
• ISA 240 – auditor responsibilities
• Fraud risk assessment in planning
• Presumed fraud risk: revenue recognition
• IT fraud risks – cyber fraud, data tampering, fake documents
• AI and fraud: deepfake invoices, AI-generated audit evidence risks
• Professional skepticism and red flag indicators
• Brainstorming fraud risks as a team
• Internal and external auditors
• Trainee and junior auditors
• Audit seniors and supervisors
• Independent reviewers
• IT audit beginners
• Accounting professionals transitioning to audit
