Role pf Auditors and Fraud

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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otentially more costly to the client than the action it is designed to shield, is the auditor acting in the best interests of his client by exposing the questionable transactions? Deterrence of fraud, that is, the prevention or discouragement of fraudulent action being taken in the first place, is the responsibility of management. Internal auditors can be responsible for examining and evaluating the adequacy of actions taken in this regard, but cannot be responsible for initiating such action. Detection of fraud, that is, the identification of impropriety, can be properly and effectively handled by internal auditors. In fact, internal auditors are increasingly being expected to have sufficient knowledge of fraud in the client's environment to be able to identify indicators that fraud might have been committed. If significant control weaknesses are detected, additional tests should be carried out in order to identify other indicators of fraud. Some examples of control weaknesses include unauthorized transactions, override of controls, unexplained or unauthorized pricing exceptions and unusually large product losses (Practical Accountant, 1987, p. 28). Auditors are responsible for determining whether fraud may have been c
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