During the planning phase of the engagement, an early assessment of the risk that irregularities (including fraud) would result in the financial report having a substantial misstatement should be performed.
Auditing irregularities can include purposefully misstating numbers and other information in financial statements, as well as missing information that is needed to be declared. Unintentional mistakes or errors are typically separated from accounting irregularities.
Following that, audit processes should be developed to offer reasonable certainty that such misstatements would be identified. Audit measures are not required to discover all cases of fraud. The audit team should be on the lookout for any changes in the initial assessment over the rest of the engagement.
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