New guidance on auditors and fraud issued this month by the International Auditing Practices Committee has reopened the debate on auditors’ responsibility in this field.
Although the IAPC guidance, which updates existing rules, is broadly welcomed in the industry, UK auditors are now questioning how far they can be held responsible and what the benefits for the public and companies are in beefing up the audit process on fraud detection.
Jonathan Beckerlegge, chairman of the audit committee at the Association of Chartered Certified Accountants, said: ‘An auditor is a watchdog not a bloodhound.
‘Auditors are not responsible for discovering fraud. I think one has got to make directors more responsible for running companies.’
Updated IAPC rules have extra requirements for the auditor to make specific inquiries of management about frauds. But, recent surveys show that fraud mostly occurs at management levels.
David Wood, deputy director of the Scottish Institute’s audit and accounting services, said: ‘I’d be very cautious before extending the scope of the audit process to detect fraud. There?s an expectation gap problem.’
Steve Maslin, head of assurance at Grant Thornton, added: ‘At times in the public’s mind there is an unrealistically high expectation of what an auditor can achieve.
‘We need more practical tools to help management even before getting to the stage of committing frauds. How can you force management to identify risk areas and then get them to report on this own?’
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