IRBA Adopts Revised ISA 240 on Auditor Fraud Responsibilities

Posted 23 January 2026 Written by Acts Online
Category Financial and Accounting

Brought to you by SA Accounting Academy: The Independent Regulatory Board for Auditors (IRBA) has formally adopted ISA 240 (Revised 2025) to enhance the regulatory framework governing how auditors identify and respond to fraud risks.

In terms of the Auditing Profession Act, No. 26 of 2005, the Independent Regulatory Board for Auditors (IRBA) has prescribed ISA 240 (Revised 2025), The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements, for use by registered auditors in South Africa. This follows the July 2025 release of the revised standard by the International Auditing and Assurance Standards Board (IAASB).

The revised standard is designed to clarify the auditor’s role in detecting material misstatements due to fraud and to reinforce the application of professional scepticism throughout the audit process. The enhancements align with ISA 570 (Revised 2024), Going Concern, acknowledging the frequent correlation between fraudulent financial reporting and financial distress.

Key Regulatory Enhancements

The revised standard introduces several substantive changes to audit procedures and reporting requirements:

  • Fraud-Focused Risk Assessment: More robust procedures for identifying and assessing risks of material misstatement due to fraud.
  • Governance Communication: Strengthened requirements for two-way communication with those charged with governance regarding fraud risks and suspected instances of fraud.
  • Transparency in Reporting: Enhanced requirements for disclosing fraud-related matters in the auditor’s report, including specific impacts on Key Audit Matters (KAM).
  • Documentation Standards: Stricter requirements for documenting the auditor’s procedures and the basis for conclusions reached regarding fraud risks.
  • Technology and Scalability: Guidance on the impact of automated tools and techniques in fraud detection, with considerations for the audit of smaller, less complex entities.

The standard is effective for audits of financial statements for periods beginning on or after 15 December 2026. The IRBA has confirmed that early adoption is permitted.

Click here to download the IRBA Communiqué on ISA 240 (Revised 2025) or access the full Revised ISA 240 Standard.

What this means for you, your business, or your clients

  • For yourself: You must apply a higher level of professional scepticism and document specific fraud-risk inquiries more rigorously to comply with the revised standards during the 2026/27 audit cycle.
  • For your business: Audit firms must update their internal methodologies, quality management systems, and staff training programs to incorporate the enhanced fraud risk assessment and reporting requirements before the December 2026 effective date.
  • For your clients: Management and those charged with governance will face more detailed inquiries regarding fraud risks and must be prepared for increased transparency in the auditor’s report concerning how fraud risks were addressed.

Originally published at https://accountingacademy.co.za/news/read/irba-adopts-isa-240-revised-2025-auditors-responsibilities-re-fraud

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