Revised CAS 240 (fraud) and CAS 570 (going concern): what changes for audits from December 2026

Two of the most watched areas of an audit, fraud and going concern, are getting revised Canadian standards at the same time. Both apply to audits of financial statements for periods beginning on or after 15 December 2026. For calendar year-end entities, that means the audit of the 2027 financial statements.

The changes affect auditors most directly, but management and audit committees will notice them in planning meetings, information requests and, in some cases, the auditor’s report.

Revised CAS 240: the auditor’s responsibilities relating to fraud

The Auditing and Assurance Standards Board (AASB) approved revised CAS 240 in June 2025, according to FRAS Canada’s project page. It is based on the IAASB’s revised ISA 240. The IAASB highlights five themes:

• Clearer responsibilities for auditors in relation to fraud.
• Professional skepticism reinforced through new requirements.
• A fraud lens on risk assessment, so fraud risks are specifically identified and addressed.
• Stronger responses when fraud is identified or suspected.
• More transparency, including more timely communication with management and those charged with governance, and more information in the auditor’s report.

The IAASB also notes that the revised standard is aligned with the revised going concern standard, recognizing that fraud and financial distress often intersect.

What management and audit committees should expect

• More detailed questions about fraud risk, incentives and pressures, and how management oversees them.
• Earlier and more frequent communication if the auditor identifies fraud or suspected fraud.
• Closer attention to journal entries, management override and unusual transactions. Clean, well-documented accounting data makes this smoother.

Revised CAS 570: going concern

FRAS Canada published revised CAS 570 on 30 June 2025. The most practical change concerns the period management assesses.

A longer look-forward period

The auditor is required to request that management extend its going concern assessment to cover at least twelve months from the date of approval of the financial statements, rather than from the reporting date. If management is unwilling to extend its assessment, the auditor must discuss the matter with management and those charged with governance, and it may affect the auditor’s opinion.

More transparency

The revised standard enhances the auditor’s responsibilities relating to going concern and increases transparency in the auditor’s report. The Canadian Public Accountability Board has followed this topic closely through its own going concern work and supported the revisions.

What does not change

According to FRAS Canada, these changes apply to audits; review engagements under CSRE 2400 are not affected. Compilation engagements follow a separate standard, CSRS 4200, which has applied to compiled financial information for periods ending on or after 14 December 2021.

Why the timing matters

Although the effective date looks distant, the extended going concern period means management’s forecasts for the first affected audit must reach well into the following year. Firms and finance teams that update their processes during 2026 will avoid compressing that work into the year-end close.

A practical checklist

For management

1. Extend cash flow forecasts to cover at least twelve months beyond the expected approval date of the financial statements.
2. Document key assumptions, financing arrangements and covenant headroom.
3. Refresh your fraud risk assessment and record who reviews it.
4. Make sure journal entry data, user access logs and approval trails can be extracted easily.
5. Brief the audit committee on both standards before the planning meeting for the first affected year.

For audit firms

1. Update methodology, templates and engagement letters for periods beginning on or after 15 December 2026.
2. Plan training on the fraud lens, skepticism documentation and the extended going concern period.
3. Review how you analyze full populations of journal entries. Better data extraction from clients’ accounting systems supports both standards.
4. Prepare communication templates for those charged with governance.

How we can help: Our upcoming financial audit division uses AI to prepare audit files from clients’ accounting systems, helping Canadian accounting firms work with complete data under the revised standards. Visit our financial audit page, our CAS and CSRS 4200 page, or contact us.

Sources

• FRAS Canada – Fraud project (revised CAS 240)
• FRAS Canada – Revised CAS 570, Going Concern
• IAASB – IAASB revises fraud standard to enhance public trust (July 2025)
• CPAB – Going concern
• CPA Canada – The new compilation engagements standard (CSRS 4200)