Auditors and Fraud – and the end of Watchdogs and Bloodhounds

Author:Martyn JONES, ACCA

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Keywords:fraud, error, material misstatement, auditor, financial statements

Abstract:
This article examines the definitions given by International Standard on Auditing (ISA) 240 (Redrafted) of fraud and error, and the historical expectations of the audit role. \r\nIt also defines the extent of auditor responsibilities for the prevention and detection of fraud, including the need for professional skepticism and discussion among the engagement team. \r\nThe article then summarises the key risk assessment procedures required of auditors by ISA 240 (Redrafted), and concludes that the traditional ‘watchdog not bloodhound’ philosophy regarding the extent of auditor responsibilities for fraud detection is no longer valid in the context of the requirements of the redrafted ISA.\r\n

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