Webclass 71: ISA 240 – is your audit department really proficient in assessing the risk of financial statement fraud?

Q1. Big 4 audit firms used to work on ISA 240 by taking samples?

Yes

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No

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Q2. What was the fraud scenario at Patisserie Valerie?

Making it look like the cash position was better than reality

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Stealing cakes from the stores

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Q3. How much was the fine for KPMG over the Carillion case?

1.3BN GBP

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1.3M GBP

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Q4. What were the obvious red flags at Carillion?

Increasing accounts receivables, with increasing debt and extended payment delays to vendors

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Increasing cost relating to construction projects

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Q5. If fictitious journal entries are entered to change the age of customer debt, will we be able to detect rising receivables over time?

No

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Yes

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Q6. When is the new update to ISA 240 effective?

December 2021

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December 2022

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Q7. What is the impact for internal auditors?

More discussion with external audit

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Less work because external audit will do more

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Q8. If the auditor notices a significant transaction that they cannot explain during the audit, should they consider adding audit procedures?

Yes

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No

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Q9. What is the stand-back approach?

Requests that auditors look at the entity as a whole and consider all aspects

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Requests that the auditors take more distance from management

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Q10. Given the concept of scepticism, should an internal auditor rely on manual excel reports from the finance department?

No

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Yes

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Q11. What are the main areas that ISA 240 highlights as being typical areas to check for fraud in the financial statements?

– Adjustments – Estimates – Omissions – Misapplication – End of period – Advancing/ delaying – Complex transactions – Unrelated/ seldom used accounts – Unusual/ inappropriate users – Intercompany or non-consolidated third-party – Unusual trends: desagregated data/ Unusual balance sheet trends – Inventory shortages – Matching employees/ suppliers/ customers – Sales discounts – Large/ unusual expenses/ management expenses

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– Journal entries that are entered throughout the period in a standard trend – Journal entries entered by the finance department – Journal entries entered after hours

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Q12. Should an auditor adopt an attitude of professional scepticism, if the finance department denies access to data?

Yes

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No

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Q13. Which SAP table can help us to see if a general ledger account is a balance sheet account or a profit and loss account?

SKA1

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SKB1

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Q14. Which SAP table can help us to see if a general ledger account is related to disbursements?

SKB1

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SKA1

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Q15. Why might we want to make a hierarchy of GL accounts?

So that we can easily add up the accounts relating to sales/ revenue/ COGS/ Expenditure for purchasing of materials, etc. in order to create ratios

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So that we can find rare GL accounts

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Q16. Should the auditor rely on the hierarchies provided by the finance department?

No, the auditor should always adopt professional scepticism

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Yes

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Q17. If we want to compare Accounts Receivable to revenues over time, should we use the balance of Accounts Receivable or the actual total value posted to accounts receivable, in the period?

The balance

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The value

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Q18. Where can we find the starting balance at the beginning of the year for all accounts?

In the table GLTO

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In the table BSAK

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Q19. Why might we want to automate the creation of the GL hierarchies?

To get a quick idea about what the GL accounts are for so that we can do some comparisons of trends over time on disaggregated data (for example receivables versus payables)

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To be able to filter on fictitious journal entries

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Webclass 71: ISA 240 – is your audit department really proficient in assessing the risk of financial statement fraud?

Webclass 71: ISA 240 – is your audit department really proficient in assessing the risk of financial statement fraud?

admin June 9, 2026

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