This report attempts to understand the role auditors may be expected to assume in the 1990s regarding the detection and reporting of fraud. This paper begins with an exploration of what constitutes fraud, how auditors can uncover fraud, and examines modifications in approach that could alleviate the problem of fraud in the future.
One of the obvious difficulties arising from auditors detecting fraud is the fact that fraud is an illegal act which can only be determined by a court. So what an auditor is looking for, therefore, is not fraud, per se, but the appearance of impropriety (Accountancy, 1988, p. 164).
An audit is the independent examination of the financial statements of an ongoing entity. The auditor is expected to offer an opinion on said financial statements based on his appointment and in compliance with any relevant statutory obligations.
To that end, the auditor is concerned with whether the financial statements give a true and fair view of the company's position, and whether the consequences of any act or transaction called into question would have a material impact on the financial statements. Additionally, the auditor should also consider whether the consequences of the act or transaction have any impact on other reporting responsibilities.
When conducting an audit of financial statements, the auditor has a duty to act with skill and care given the particular circumstances. His conduct will be judged by reference to the standards generally applied
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