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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › FRAUD & MATERIALITY
Hi Mr Ken,
Could you please explain why the risk of fraud may have effect that reduced materiality?
Thank you in advance 🙂
Audit risk should be reduced to an acceptable level by responding appropriately to identified risks.
If the risk of fraud is thought to be high then auditors need to respond to this. Many frauds are for small amounts but repeated many times so could slip through the net. Reducing materiality levels (eg look at transactions over $250 rather than just over $1,000) then there is a greater chance of spotting fraud.