Auditors to become detectives of fraud
Wednesday 25 January 1995
Two new auditing standards follow years of debate in the accountancy profession over the so-called "expectation gap" - the credibility gap that exists between auditors and the public over how far the accountants should be held responsible for fraud discovered inside companies they have audited..
The problem was exacerbated during the recession when fraud was discovered in a number of large companies that had collapsed, such as Polly Peck, Robert Maxwell's business empire and Bank of Credit and Commerce International. Shareholders in particular demanded to know why auditors had not spotted the wrongdoing.
Auditors countered that their job was to make reasonable comments on the financial statements produced by their clients' managements, and not to detect fraud.
One of the APB's new standards, SAS 110, acknowledges that fraud may well involve conduct designed to avoid detection. It requires auditors, having obtained an understanding of the company and its business, to assess the risk of material fraud and to perform procedures in response to those risks. Where the public interest is affected, auditors must report to the appropriate authority.
The standards do not have the force of law but must be followed by all auditors governed by the APB, which in effect means the entire profession in the UK.
The second standard, SAS 120, covers the law and regulations relating directly to the preparation of an entity's financial statements. Auditors are expected to perform sufficient work to form an opinion on whether material rule-breaking has taken place.
Ian Plaistowe, APB chairman, said the standards established a determined and realistic approach to the problem. "We expect auditors to take a positive role in seeking material fraud or non-compliance."
Diving in at the deep end is no excuse for shirking the style stakes
- 2 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
- 3 Why I'm on the brink of burning my Israeli passport
- 4 L'Oreal cuts ties with Belgium supporter Axelle Despiegelaere after hunting trip photographs
- 5 The true Gaza back-story that the Israelis aren’t telling this week
Instagram of US airport security chiefs: Lipstick knives and IED training kits among items seized
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Loom bands: Bids for dress made from colourful rubber reach almost £154,000 on eBay
Israel-Gaza crisis: Eight killed in Gaza Strip cafe while watching World Cup semi-final
Supermoon 2014: When and why will the moon look bigger and brighter this summer?
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£50000 - £70000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...
£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...
Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...