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Fraud and COVID support – Audit risk assessments

During the last year, lots of businesses have had to rely on the COVID-19 financial support provided by the Government. 

Unfortunately, there is growing concern about fraud that may have been conducted during the use of these schemes.

That is why HMRC is already undertaking many investigations into businesses and individuals that it suspects of misusing the support on offer. 

At this time, the UK Government has not imposed additional audit or assurance requirements in relation to these support schemes.

However, despite this, businesses should be aware that under the ISA 240 auditing standard, the primary responsibility for the prevention and detection of fraud rests with management and those charged with governance of an entity. 

As such, auditors are ensuring that they meet their responsibilities concerning fraud and non-compliance with laws and regulations and many are reporting any potential risks within their audit reports. 

The risk of fraud and the requirements of ISA 240 also mean that audit engagement teams must discuss how and where financial statements may be susceptible to material misstatement due to fraud, including how fraud might occur.

Users of audit services should be aware of this and consider the risk to their business if fraud is uncovered as part of an audit. 

Before beginning an audit, the ICAEW says that businesses may want to ask themselves the following three questions: 

  • Has working remotely or with modified controls given individuals greater opportunity to make fraudulent applications? 
  • Could aspects of the support scheme applications present opportunities to commit fraud?
  • Could individuals have taken advantage of the complexity of rules while making claims?

Depending on the outcome of audit risk assessments, auditors may need to perform further checks on Government support claims. Businesses need to be prepared for this, as it may add extra complexity to the audit process. 

If you are looking for advice on audits, please contact your Seymour Taylor representative today or email or call 01494552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 11  August 2021.