The Degree Of Auditor Responsibility For The Detection Of...

The degree of auditor responsibility for the detection of fraud has been re-defined repeatedly over the history of audit and is still generating considerable discussion in recent years, at the hand of financial crisis and a number of huge scandals, such as Enron – WolrdCom – Parmalat – Satyam Computer Services, which caused auditing to become headline news, and therefore widened the expectations gap between the audit firms and the public, and raised further questions about the audit value to society. â€Å"In the 19th century, detection of fraud was an audit objective and it the auditor had a duty to report to shareholders all dishonest acts, which had occurred, and which affected the propriety of the contents of the financial statements†Ã¢â‚¬ ¦show more content†¦Numerous surveys in the 1980s have served to underline the significance and extent of fraudulent activities in the corporate sector (Humphrey and Turley, 1993, pp. 39-62). â€Å"The auditor has a duty to search for fraud and is expected to detect fraud by the exercise of professional skill and care† (Rittenberg and Schwieger, 2005). As a result of all the recent fraud scandals in large corporations and fraud cases, investors concerns about fraudulent financial reporting has increased and therefore external auditors are getting the blame for not detecting fraud, while audit regulators are put into pressure to meet the public s wants. In response, audit regulators (i.e. (AICPA, IAASB) have published a number of professional fraud standards (SAS No. 1: â€Å"Responsibilities and functions of the independent auditors†; SAS No. 99: â€Å"Consideration of fraud in a financial statement audit†; and ISA No. 240: â€Å"The auditor’s responsibilities relating to fraud in an audit of financial statements†). Nonetheless, the expectation gap remains wide today – the overall picture has not changed much and the problem of fraud in audit remains unsolved. â€Å"Estimated typical organisation loses accounts for 5% of revenues each year to fraud. If applied to the 2013