05-29-2009, 08:30 AM
An auditor is not bound to be a detective, or
⦠to approach his work with suspicion, or with
a foregone conclusion that there is something
wrong. He is a watchdog, not a bloodhound.â
âAn auditor conducting an audit
in accordance with ISAs is responsible for
obtaining reasonable assurance that the financial
statements as a whole are free from material
misstatement, whether caused by fraud or error.â
ISA 240 (Redrafted), paragraph 5.
Hence, both the entity itself and the auditors
have responsibilities for fraud and error. It could
be said that management, and those charged
with governance, have the primary responsibility
for fraud and error, whereas the auditor has a
secondary responsibility. It is important, however,
to ensure that the extent of these secondary
responsibilities are clearly understood,
The Auditorâs Responsibility
to Consider Fraud in an Audit of Financial
Statements, which became effective for periods
commencing on or after 15 December 2004.
According to ISA 240 (Redrafted) the difference
between fraud and error depends upon whether
deception has been used, and the distinction
between the responsibilities of those charged
with governance and auditors for fraud prevention
can be described respectively as primary and
secondary responsibilities. Auditors are required,
however, to maintain an attitude of professional
skepticism throughout the audit, and members
of the audit engagement team are required to
discuss the susceptibility of the entityâs financial
statements to material misstatement due to fraud.
ISA 240 (Redrafted) requires auditors to
perform risk assessment procedures to obtain
information for use in identifying the risks of
material misstatement due to fraud.
⦠to approach his work with suspicion, or with
a foregone conclusion that there is something
wrong. He is a watchdog, not a bloodhound.â
âAn auditor conducting an audit
in accordance with ISAs is responsible for
obtaining reasonable assurance that the financial
statements as a whole are free from material
misstatement, whether caused by fraud or error.â
ISA 240 (Redrafted), paragraph 5.
Hence, both the entity itself and the auditors
have responsibilities for fraud and error. It could
be said that management, and those charged
with governance, have the primary responsibility
for fraud and error, whereas the auditor has a
secondary responsibility. It is important, however,
to ensure that the extent of these secondary
responsibilities are clearly understood,
The Auditorâs Responsibility
to Consider Fraud in an Audit of Financial
Statements, which became effective for periods
commencing on or after 15 December 2004.
According to ISA 240 (Redrafted) the difference
between fraud and error depends upon whether
deception has been used, and the distinction
between the responsibilities of those charged
with governance and auditors for fraud prevention
can be described respectively as primary and
secondary responsibilities. Auditors are required,
however, to maintain an attitude of professional
skepticism throughout the audit, and members
of the audit engagement team are required to
discuss the susceptibility of the entityâs financial
statements to material misstatement due to fraud.
ISA 240 (Redrafted) requires auditors to
perform risk assessment procedures to obtain
information for use in identifying the risks of
material misstatement due to fraud.