[I wrote this for my Auditing course. Read on if you have a high tolerance for boredom!]
Every so often, an article pops up headlined by attention seeking catch phrases such as: “Tragic fraud points to bigger failing”, “Local business president arrested on fraud charges” or “Goldman Sachs profit drops amid fraud charges”. The sad reality is that we live in a money wrenching, profit steering world where even the best of us are tempted to fill our pockets with fraudulent earnings. When investors find out that their hard earned retirement funds have been looted to an off-shore account and will never be seen again, all hell breaks loose and fingers are pointed in all directions looking for persons to blame. The fraudsters themselves are unlikely to cough up anything as they will have nothing to show for the theft. Further, there is no money to recover or assets to seize, so the next best thing is to target the deep pocketed auditors and their professional liability insurances (Coenen, 2007). However, what most people do not realize is that auditors’ main responsibility is not to unearth any kind of fraudulent acts. So then, what exactly are the duties of an independent auditor? More importantly, what roles – if any – do auditors and management play in fraud detection? If fraud were to occur, who must shoulder the blame and be held responsible? The purpose of this article is therefore quite clear: To fully explain and critically examine the duties and responsibilities of an auditor in terms of fraud and error detection.
[To read the rest, click here.]