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."
- 1 PlayStation and Xbox hacked by Lizard Squad
- 2 Christmas comes early to Hong Kong, as millions of bank notes spill out onto busy street
- 3 The 'Black Museum': After 150 years, public can visit police’s grisly crime museum
- 5 Vagina canoe artist facing two years in jail defends herself over ‘obscenity’ charges
PlayStation and Xbox hacked by Lizard Squad
Antonio Martin shooting: Black teenager may have tried to ambush patrolman, says police officer's lawyer
Katie Hopkins speaks out on childhood obesity: 'Parents of fat children should be prosecuted for child cruelty'
Boxing Day snowfall set to push even more bargain-hunters online for sales
The 'Black Museum': After 150 years, public can visit police’s grisly crime museum
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Alex Salmond has 'broken his word to the Scottish people' says Scottish Lib Dem leader
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...