What it is
AU-C 240 requires the engagement team to discuss how and where the entity’s financial statements could be materially misstated due to fraud, to make inquiries of management, those charged with governance and others, and to document the fraud risks identified and the response.
This template records the team discussion, each inquiry, the fraud risk factors considered (incentive or pressure, opportunity, attitude or rationalization) and how the audit responds, including the procedures required for management override.
When to use it
- At planning, before the risk assessment is finalized.
- When new information during fieldwork changes the fraud risk assessment.
What’s inside
- Engagement team discussion: attendees, date, topics and conclusions
- Inquiries of management, governance, internal audit and other personnel
- Fraud risk factors under the three conditions
- Revenue recognition presumption (rebutted or not, and why)
- Responses: overall, assertion-level and management override procedures
Standard cited
This template follows AU-C 240. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 240 explained.
Questions
Who must attend the fraud brainstorming session?
AU-C 240 requires a discussion among key engagement team members, including the engagement partner. The partner decides which matters are communicated to members who did not attend. Specialists who play a key role are commonly included.
Can the revenue recognition fraud risk be rebutted?
Yes, the presumption that revenue recognition is a fraud risk can be rebutted, but the reasons must be documented. The risk of management override of controls cannot be rebutted; journal entry testing, a review of accounting estimates for bias and an evaluation of significant unusual transactions are always required.
Related templates
- Journal Entry Testing Workpaper (AU-C 240)
- Audit Risk Assessment Worksheet (SAS 145)
- Audit Planning Memo (AU-C 300)
Last updated 11/04/2026. All free templates.