Auditor responsibility to consider the fraud

Author:University professor, PhD. Ion MIHĂILESCU, PhD. student Niculina MARCU

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Keywords:risk assessment, management statements, procedures, audit tests, risk factors, confidentiality/transparency

Abstract:
For the auditor is important to very well understand the entity objectives and strategy, because they generate business risks, which can generate material misstatements in the financial statements. However, the auditor does not have the responsibility to identify or to assess all the business risks because not all this kind of risks generates materials misstatements in the financial statements.\r\n\r\nThe specialized literature and the practice recognize that in order to reduce the audit risk at an acceptable level, the auditor should determine the general responses to the assessed risks at the financial statements level and he/she should design and apply other audit procedures in order to answer to the assessed risks at the assertions level. \r\n\r\nThe nature of the audit procedures in of a major importance in answering to the assessed risks. When establishing the audit procedures to be applied, the auditor considers the reasons for assessing the risks of material misstatements for each class of transactions, account balance and information presented. This means to consider both the specific characteristics of each class of transactions, account balance or presentation of information (and we refer here to the inherent risks) and if the risk assessment take into account or not the results of the entity controls (i.e. the control risks).\r\n\r\nIn this context, the authors present and comment the main procedures and testing which should be considered, as well as the risk factors needed to be considered. They also present examples of situations that could be met, as well as the solutions for their treatment. \r\n\r\nAn important issue the authors points out is the relations with the entity management and with those in charge with the governance when they identify frauds and the relation that should be established with the regulators authorized by the law.\r\n\r\nThe authors reach the conclusion that the success of an audit engagement when meeting a series f material risks related to fraud or errors, largely depends on the auditor’s professionalism, but also on his/her ethical behavior. the profession has clear standards in this direction; it is essential to be rigorously followed. And we have also to mention here the sixth sense on detecting the irregularities – which is sense, doubled by a significant professional experience.\r\n

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