The Responsibilities of Internal and Independent Auditors

Topic 3: The Responsibilities of Internal and Independent Auditors, Auditing Standards and Procedures and Fraud Detection and Prevention
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The Responsibilities of Internal and Independent Auditors, Auditing Standards and Procedures and Fraud Detection and Prevention
Introduction
Fraud has become a very complicated problem in this era of technology; fraud is becoming increasingly difficult to detect resulting to a tremendous loss to several businesses and also creating moral problems in workplaces. The accounting profession is concerned about the rising cases of fraudulent activities worldwide, especially in cases where top management is concealing such acts. In this respect, auditors argue that detection of fraud is not part of their responsibility as much as attention has focused on management of fraud and their failure of auditors to detect and report fraud (Alleyne & Howard, 2005).
The Role of Auditors
From inception, the role of auditors has not been well defined, according to the Financial Accounting Standards Board , auditors needs to report to the shareholders all dishonest acts that occur which can affect the property contents of the financial statements . In addition, auditors are not expected to uncover all fraud committed within the company, this is because auditors are not guarantor or insurers. Instead, the main role of preventing and detecting fraud in an organization lies with the management (Boynton, Johnson & Kell, 2005).
According to the auditing standards and procedures, auditors should be concerned about suspecting fraud rather than proving fraud or any irregularity. Auditors alone are not the most suitable people to detect fraud; it is the responsibility of the company to institute appropriate fraud prevention measures. This is because management of fraud involves avoiding internal control procedure thus escaping detection until a company suffers irreversible damages. Fraud is essentially fraudulent financial reporting or misapplication of accounting principles that can be easily mitigated by the top management. An example includes when there is an overstatement of the balance sheet indicating more inventory at hand compared to what is there. (Campbell and Lindsey, 1994).
Because of numerous transactions made by companies, it is not possible for internal and independent auditors to examine all the transaction. (Beasley, 1996). Auditors may sample out and test procedures to offer only reasonable assurance about the content of the financial statement to the stakeholders. In addition, during audit processes, the auditor cannot uncover other unrecorded transactions, theft and also other irregularities (Gay, Schelluch & Reid, 1997).
From an investors perspective fraud detection is important to protect their investment, this means that auditors need to be proactive in detecting and exposing any fraudulent activities. It is also important for auditors to protect and preserve their professional reputation to maintain the company's integrity and avoid any legal costs. Fraud usually occurs because the responsibility for prevention is not an assigned task. Moreover, the roles of internal and independent auditors are not defined from inception but auditors ar...