The Responsibility of the External Auditor and the Management of the Entity Being Audited with Relation Fraud and Error.

1585 Words Mar 8th, 2012 7 Pages
Assignment number :01
Course code: HONOUDK
Student number: 36894206
The responsibility of the external auditor and the management of the entity being audited with relation fraud and error.
1.Introduction
Fraud is defined as something that is intended to deceive people and error is defined as something unintentionally done wrong, e.g. as a result of poor judgment or lack of care by Encarta English Dictionary. After the collapse of great companies like Enron, and World com to mention a few, it has raised eyebrows the involvement of auditors in these failed companies and have put the importance of effective corporate governance in the spotlight. It was well documented fact that Arthur Anderson the auditors were involved in the Enron
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That’s why it is always required that auditors should maintain an objective, unbiased and independent mind, and give special attention to this area. The auditor should understand the entity’s internal control in its totality.
Fraud and other irregularities are different to errors as perpetrator intended deception and it could be a person that knows the operations and accounting systems of the company very much, and also the management may override internal controls and makes an effort to conceal the misstatements. It is important to note that whenever there is an accounting scandal or fraud has been committed. The question that always arise is “Where were the auditors?” when this unfortunate events occurs. According to . According to Arens,Elder, Beasly & Splettstoesser-Hogeterp (2007:288) auditors should maintain a questioning mind and set aside any previous trust in management’s integrity and honesty. Maintaining a questioning mind involves a critical evaluation of audit evidence presented to the auditors, they should diligently probe any audit issues and acquiring if necessary any additional evidence needed in the audit.
Assignment number :01
Course code: HONOUDK
Student number: 36894206
2.2 The responsibility of management
The South African Institute of…

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