Auditor Essay

339 WordsMar 30, 20132 Pages
Chapter 2 An Overview of Financial Statement Auditing 45 The Auditor’s Responsibility for Errors, Fraud, and Illegal Acts The financial statements are the responsibility of management, while the auditor’s responsibility is to express an opinion on the financial state- ments. Many readers of financial statements believe that auditors have a responsibility to detect all errors, fraud, and illegal acts. Section 5135 of the CICA Handbook, “Auditor’s responsibility to detect and communicate misstatements” and section 5136, “Misstatements–Illegal acts,” discuss the auditor’s responsibility regarding error, fraud, and illegal acts. According to the Handbook, the auditor’s responsibility is to conduct the audit in ac- cordance with GAAS and to detect material misstatements. This implies that the auditor is responsible for material misstatements regardless of source. Conversely, it implies that the auditor is not responsible for detect- ing immaterial misstatements, regardless of source. The Handbook requires the auditor to adopt an attitude of professional scepticism, but also points out that the auditor’s ability to detect fraud, which involves intent, is hampered by the fact that fraud is usually accom- panied by acts designed to conceal its existence. The issue of auditor responsibility in this area is one where a major “expectation gap” still exists. 1 Chapter 6 will cover in detail the auditor’s responsibility with respect to fraud and illegal acts. The general auditing standard (see Table 1–5) requires that the auditor exercise due professional care in the planning and performance of the audit. Due professional care requires that the auditor exercise professional scepticism, which is an attitude that includes a questioning mind and a critical assessment of audit evidence. Section 5090 of the Handbook indi- cates that, in

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