Consideration of International Standard on Auditing (ISA 240) for Sustainable Financial Fraud Detection: Evidence from Malaysia

DOI

10.2991/978-2-38476-358-0_11How to use a DOI?

Keywords

Financial Statements; Sustainable Fraud Detection; External Auditors; Internal Auditors; Government Auditors; ISA 240

Abstract

This study examines auditors’ understanding and application of the International Standard on Auditing (ISA 240) in their audit of financial statements in Malaysia for sustainable fraud detection. The study aims to address two key issues: first, the auditors’ comprehensive understanding of ISA240 standards, and second, the auditors’ characteristics related to ISA240 standards when auditing financial statements for sustainable fraud detection. Based on the Fraud Diamond Theory, a questionnaire was developed through the key elements: “pressure,” “opportunity”, “rationalization,” and “capability”. The respondents involved three types of auditors: external auditors, internal auditors, and governmental auditors in Malaysia. A questionnaire link was distributed through contact persons, and 313 completed responses were collected over three months, from July to September 2023. Data analysis was conducted using the Rasch Measurement Model. The results indicate that, although auditors recognize the utility of fraud risk indicators outlined in ISA 240, their practical application remains limited. The results strongly support the need for customized training programs to maintain auditors’ ability to sustainably detect financial fraud with accuracy and excellence. Such programs are crucial given the specialized expertise required to uncover such fraud, which demands specific training modules. The study provides valuable insights into the perceptions of auditing standards and the essential role of professionals, particularly auditors in Malaysia. From a methodological perspective, the study utilized the Rasch Measurement Model to allow for the seamless integration of both quantitative and qualitative aspects of the results.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Download article (PDF)

TY  - CONF
AU  - Hussein H. Sharaf-Addin
AU  - Normah Omar
AU  - Nor Azam Bin Yaacob
PY  - 2025
DA  - 2025/01/31
TI  - Consideration of International Standard on Auditing (ISA 240) for Sustainable Financial Fraud Detection: Evidence from Malaysia
BT  - Proceedings of the International Conference on Environmental, Social, and Governance (ICESG 2024)
PB  - Atlantis Press
SP  - 121
EP  - 142
SN  - 2352-5398
UR  - https://doi.org/10.2991/978-2-38476-358-0_11
DO  - 10.2991/978-2-38476-358-0_11
ID  - Sharaf-Addin2025
ER  -