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Auditors’ Role in Fraud Detection

339 words | 2 page(s)

It is the role of the managers to prevent fraud within organizations. However, the roles that auditors play in this sense cannot be overlooked. Although auditors will not in most cases be held responsible for preventing fraud and operational errors, they may have a positive role to play in preventing fraud and related errors by deterring their occurrence (Ramos 28). Depending on the financial information for which the auditor is employed to look into, he or she should be in a position to develop programs and procedures that will assist in eliminating cases of fraud.

Currently, auditors are required to be armed with skills and tools that help serve three main purposes with relation to prevention and detection of fraud. To begin with, the auditors will use such tools to gather relevant information that will be useful in identification of risks that may arise due to material misstatement due to fraud. The second role would be an assessment of the identified risks (Ramos 28). This assessment takes place soon after the auditors have looked into the organization’s programs and controls. The final stage would involve development of response to the problems and errors detected from the analysis. This information is communicated to the management and the proposed recommendations by the auditors should not be taken for granted.

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In order to successfully detect fraud, auditors must be ready to overcome natural tendencies. This may include reduction of reliance on client representations. There has to be a sense of doubt in any information that is provided by the companies’ personnel. They have to be ambitious in finding out the facts by following all the financial reports. The other requirement is that the auditors need to be in constant negotiations with the managers before and in the course of the audit process. Though it is a role that is bestowed on the managers, fraud detection largely lies on the part of auditors.

    References
  • Ramos, Michael. Auditors’’ Responsibility for Fraud Detection; Journal of Accountancy pp. 28-35. ABI/INFORM. 2003. Internet Source. http://users.ipfw.edu/

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