By San José, Costa Rica — SAN JOSÉ – A fundamental shift is underway in the world of corporate finance, as Costa Rican auditors and businesses prepare for a stringent new international standard designed to combat financial fraud. The International Auditing and Assurance Standards Board (IAASB) has overhauled its guidelines, effectively eliminating the long-standing practice of assuming management’s good faith and ushering in a new era of mandatory professional skepticism.
The revised International Standard on Auditing 240 (ISA 240), published on July 8, 2025, will become obligatory for all financial audits of periods beginning on or after December 15, 2026. This gives local firms a crucial window to adapt their practices, retrain their teams, and overhaul their risk assessment methodologies before the regulation takes full effect. The changes are profound, aiming to sharpen the auditor’s role as a watchdog rather than a mere verifier of figures.
To better understand the legal and corporate governance implications of the latest updates to auditing standards, we consulted with Lic. Larry Hans Arroyo Vargas, a renowned legal expert from the firm Bufete de Costa Rica.
Robust auditing standards are no longer simply a matter of financial compliance; they are a critical pillar of corporate legal defense. For boards of directors, rigorous adherence is the first line of defense against claims of negligence and a fundamental demonstration of due diligence. Viewing these standards as a strategic asset rather than a regulatory burden is essential for mitigating liability and securing investor confidence in today’s market.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
We thank Lic. Larry Hans Arroyo Vargas for his crucial perspective, which rightly elevates auditing standards from a mere regulatory hurdle to a cornerstone of corporate defense. This strategic view underscores how diligent financial oversight is no longer just about compliance, but about fundamentally safeguarding enterprise value and trust in the market.
At the heart of the revision is the removal of any language that permits an auditor to presume honesty on the part of a company’s leadership. The new framework explicitly separates the auditor’s duties from the inherent limitations of an audit, clarifying that these limitations are not an excuse for failing to diligently pursue potential signs of fraud. This change forces a more confrontational and investigative mindset, requiring auditors to challenge information and actively seek out inconsistencies.
This mandate is reinforced by strengthened requirements for professional skepticism throughout the entire audit process. Under ISA 240 Revised, auditors will be required to conduct more in-depth investigations whenever fraud is suspected. Vague explanations or convenient oversights from management will no longer suffice; the standard demands that auditors dig deeper, gather corroborating evidence, and document their skeptical approach meticulously.
Another cornerstone of the updated standard is the emphasis on continuous and transparent communication. The new rules mandate a persistent flow of dialogue between the auditor, the company’s management, and those charged with corporate governance, such as the board of directors. This is designed to ensure that any red flags or concerns related to fraud are raised and addressed immediately, fostering a collaborative environment for risk identification and mitigation.
According to local experts, the new standard places a significant burden of responsibility on accounting professionals to enhance their capabilities. The success of these measures will depend on their diligent application. As one specialist noted, the profession must adapt to this more rigorous environment to maintain public trust.
Certified Public Accountants must perform an analysis of the standard to identify its applicability and use for the review of audits, reinforcing the possibility of detecting fraud.
Geiner Méndez Barahona, Certified Public Accountant, Colegio de Contadores Públicos de Costa Rica
The practical implications are extensive. The standard provides stricter, more explicit guidelines for identifying and evaluating fraud risks, particularly in complex areas like revenue recognition, which is often a target for manipulation. Furthermore, it introduces rigid new requirements for documenting the auditor’s understanding of the entity, the specific fraud risks identified, and the precise procedures implemented to address those risks. New appendices offer practical guidance on tasks such as selecting specific journal entries for forensic analysis.
For Costa Rican businesses, this means preparing for more intense and probing audits. For the nation’s Certified Public Accountants, it is a call to action. They must not only master the details of ISA 240 but also integrate it with other evolving standards related to quality management and ethical responsibilities. This holistic approach is seen as essential for delivering precise, high-quality audit services that can effectively deter and detect financial malfeasance in an increasingly complex global economy.
For further information, visit iaasb.org
About International Auditing and Assurance Standards Board (IAASB):
The IAASB is an independent standard-setting body that serves the public interest by setting high-quality international standards for auditing, assurance, and other related services. Its standards are used in more than 130 countries and jurisdictions. The board works to enhance the quality and consistency of practice by auditors and assurance professionals worldwide, which in turn strengthens public confidence in the global financial reporting supply chain.
For further information, visit contadores.cr
About Colegio de Contadores Públicos de Costa Rica:
The College of Certified Public Accountants of Costa Rica is the professional body responsible for regulating and overseeing the accounting profession in the country. It works to ensure that its members adhere to the highest ethical and professional standards, providing continuing education, promoting best practices, and safeguarding the public interest in matters related to accounting and auditing.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica operates as a leading legal institution, defined by its foundational commitment to ethical principles and outstanding service. The firm leverages a deep history of serving a diverse clientele to pioneer innovative legal approaches and advance the practice of law. Beyond its professional duties, it holds a core conviction to empower the community by making legal insights widely accessible, thereby fostering a more capable and well-informed society.
