Supporting International Standards

Building Public Confidence in Audit: Fraud, Going Concern, Public Perception

Angela Donnelly, Megan Hartman | September 25, 2020

Recent corporate failures and scandals across the globe have called into question the role and responsibility of the auditor in relation to fraud and going concern in an audit of financial statements. Some examples include:

  • Toshiba Corporation (2015), Japan: Overstated operating profits by more than $1.2 billion in a scandal that began in 2008 and spanned 7 years
  • Carillion (2018), United Kingdom: The company's collapse left £2 billion owed to its suppliers and £2.6 billion in pension liabilities.
  • Luckin Coffee (2019), China: Fraudulently inflated sales by 2.1 billion yuan (over $300 million), which resulted in the company being delisted from the US Nasdaq exchange.
  • Steinhoff International Holdings NV (2017), South Africa: A fraud investigation uncovered billions of dollars of fictitious/irregular transactions.
  • Wirecard (2020), Germany: Filed for insolvency in 2020 after admitting that approximately $2.6 billion of assets on the company’s balance sheet likely did not exist.

These events, among others, have highlighted a continuing difference between what users expect from the auditor and the financial statement audit, and the reality of what an audit is. The expectation gap, which is intensified when companies collapse without warning signals, detracts from the public’s confidence and trust in the financial reporting system.

The IAASB is committed to exploring how we can play our part to help narrow the expectation gap, but we cannot solve this problem alone. Each player in the financial reporting ecosystem (which includes management and those charged with governance, internal and external auditors, governments, professional bodies, regulators and oversight bodies, investors, and others) has a role to play and must consider actions they can take to help narrow the gap and improve financial transparency.

We, therefore, ask all stakeholders to help us understand what we can do to narrow the gap by:

  1. Reading and responding to our public consultation on fraud and going concern; and
  2. Tuning in on YouTube to listen to a roundtable discussion between global experts and leaders on fraud, going concern, and auditor reporting on September 28. The discussions, including small group discussions we aren’t able to air live, will also be posted to our YouTube channel in October.

The public consultation and roundtable are part of our efforts to understand more about these important public interest issues and foster discussion on the broader financial reporting ecosystem.


Angela Donnelly

IAASB Staff Fellow

Angela Donnelly is a Staff Fellow at the IAASB. Prior to that, she was a director in PwC’s National Quality Organization and provided advice on technical accounting issues, including lease accounting, derivative and hedge accounting, and financing transactions. Up until then, she managed and performed financial statement audits, primarily serving Banking and Capital Markets clients. See more by Angela Donnelly

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Megan Hartman

Megan Hartman is a principal on the Communications team. She joined the team in 2011 after working with a number of international organizations, primarily in the not-for-profit sector. Megan holds a master’s in integrated marketing communications from Northwestern University as well as a bachelor’s from George Washington University. See more by Megan Hartman


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