Compliance with International Auditing Standard No. 240 Concerning Auditors' Responsibility for Detecting and Preventing Fraud

Munther T. Al-Momany, Jamal I. Bdour

Abstract


This study aims at investigating the extent to which Jordanian Certified Public Accountants (JCPAs) observe International Auditing Standard No. 240 (ISA 240) concerning their responsibility for detecting and preventing fraud.  The researchers designed a three-part questionnaire covering the three aspects of ISA 240 and the measures taken by the auditor to detect fraud. The researchers then selected a sample of 89 of the 148 JCPAs working in audit firms in Amman, the capital of Jordan. Sixty nine questionnaires were retrieved with a (77%) response rate.

The findings of the study revealed that the respondents take the necessary measures to detect and prevent fraud in compliance with the procedures as stated in the ISA no. 240 when fraud is detected.  Furthermore, the respondents follow the appropriate measures to report fraud to management, stakeholders and regulatory and executive bodies according to the procedures stated in the ISA no. 240.

The findings revealed statistically significant differences (at α =0.05) in the respondents' perceptions of their measures to detect and prevent fraud which can be attributed to sample demographic variables and affiliation (or lack thereof) with international auditing firms are applying those procedures more than those who do not have any association. The findings further revealed significant differences (at α =0.05) in the respondents' views regarding the measures taken when fraud is detected, which can be attributed to academic qualifications and affiliation with international firms, in favor of Bachelor and Master's degree (vs. diploma) holders. Furthermore, no statistically significant differences (at α =0.05) were detected between Bachelor and Master's degree holders. Tukey's post–hoc comparisons revealed no statistically significant differences which can be attributed to affiliation with one international auditing firm than another. Finally, the findings revealed statistically significant differences (at α =0.05) in the measures taken to report fraud to management, stakeholders, and regulatory and executive bodies, which can be attributed to the international firm with which the auditor or his/her firm is affiliated although  post-hoc comparisons did not show any statistically significant differences in favor of any international auditing firm.  Based on these findings, relevant recommendations were put forth

Keywords


Detecting fraud, Jordanian Certified Public Accountants, ISA240

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