At what stage of the assurance audit engagement must the possibility of fraud be considered?

Considering the possibility of fraud during the development of the objectives is essential for a comprehensive audit engagement. This stage involves defining the audit's purpose, scope, and specific objectives, which should inherently include the identification of risks associated with fraud. Fraud risk assessment is a foundational aspect of the audit process because it shapes the approach and methods used in subsequent phases of the audit, including planning, fieldwork, and reporting.

By reflecting on fraud risks early in the engagement, auditors can ensure that they focus on areas of high risk and tailor their procedures accordingly. This proactive approach helps auditors to design more effective audit tests and gather the necessary evidence to provide assurance regarding the reliability of financial statements or other audit subject matters.

If fraud risks are not considered at this initial stage, auditors might overlook significant vulnerabilities that could lead to misstatements or failures in governance, which may only become apparent later—after fieldwork has been conducted or during report writing. Thus, addressing fraud risk from the outset is crucial for a successful and thorough audit.