Responsibilities of the auditor, Auditing

Responsibilities of the Auditor

The Auditor has no duty for the prevention and recognition of fraud and error though the annual audit might act as a restraint.

As explained in ISA 200, “Objective and General Principles Governing an Audit of Financial Statements,” thepurpose of an audit of financial statements is to allow the auditor to state an opinion whether the financial statements are set, in all material respects, in accord with an recognized financial reporting framework. An audit performed in accordance with ISAs is designed to give reasonable assurance which the financial statements carried as an entire are free from material misstatement, whether reasoned by fraud or error. The fact that an audit is taken out might act as a deterrent, though the auditor is not and can’t be held answerable for the preclusion of fraud and error.

An audit does not assurance all material misstatements will be detected since of such factors as the employ of judgment, the use of testing, the inherent restrictions of internal control and the fact that much of the verification available to the auditor is persuasive instead of conclusive in nature. For such reasons, the auditor is capable to acquire only reasonable assurance that material mis-statements in the financial statements will be noticed.

In planning the audit, the auditor must discuss with other members of the audit team the vulnerability of the entity to material mis-statements in the financial statements resultant from fraud or error. The auditor must make investigation of management:

(A) To acquire an understanding of:

(i) Management’s assessment of risk that financial statements might be materially misstated as an outcome of fraud; and
(ii) The accounting and internal control systems management has located in place to address such risk;

(B) To acquire knowledge of management understands concerning the accounting and internal control systems in position to prevent and notice error;

(C) To establish whether management is conscious of any known fraud which has affected the entity or suspected fraud which the entity is examining; and

(D) To establish whether management has discovered any material faults.

Posted Date: 12/3/2012 5:26:54 AM | Location : United States

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