According to International Standards of Auditing 240, The auditors responsibilities relating to fraud in an audit of

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Question:

According to International Standards of Auditing 240, The auditor’s responsibilities relating to fraud in an audit of financial statements:

‘When identifying and assessing the risks of material misstatement due to fraud, the auditor shall, based on a presumption that there are risks of fraud in revenue recognition, evaluate which types of revenue, revenue transactions or assertions give rise to such risks.’

Required:

Discuss why the auditor should presume that there are risks of fraud in revenue recognition and why ISA 240 requires specific auditor responses in relation to the risks identified