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What are the functions of the auditors?
Auditors are supposed to plan and perform the audit to obtain reasonable assurance that the financial statements presented by management are free of material misstatement that are caused by error or fraud. They only provide reasonable assurance not a guarantee that there is no misstatement or fraud. If they auditor is auditing a public company they also have the responsibility to evaluate internal controls. In other words the auditor plans and audit, gathers evidence, and then makes a report stating whether or not they believe the financial statements are presented fairly.
What is an audit expectation gap?
Expectations gap === The expectation gap is the gap between the auditors' actual standard of performance and the various public expectations of auditors' performance (as opposed to their required standard of performance). Many members of the public expect that:auditors should accept prime responsibility for the financial statements,auditors 'certify’ financial statements,a 'clean’ opinion guarantees the accuracy of financial statements,auditors perform a 100% check,auditors should give early warning about the possibility of business failure, andauditors are supposed to detect fraud (See Wisconsin Law Journal article entitled, "Why Didn't Our Auditors Find the Fraud?").Such public expectations of auditors, which go beyond the actual standard of performance by auditors, have led to the term 'expectation gap’. Above retrieved from Abrema http://www.abrema.net/abrema/expect_gap_g.html Viper1
Is fraud and error what the Government strive to protect from pecuniary liability?
Yes, the government seeks to protect against fraud and error to minimize pecuniary liability. By implementing regulations, oversight, and compliance measures, it aims to ensure that public funds are used appropriately and that financial integrity is maintained. This helps to safeguard taxpayer money and maintain trust in governmental operations. Ultimately, preventing fraud and error is essential for fiscal responsibility and accountability.
When risks of material misstatement due to fraud are identified how should auditors adjust their audit approach?
meaning of material misstatement
Why must a public company have an external auditors?
External auditors are required to ensure there is no fraud (hanky panky) going on in the company. If you run a company that are check by your own employees, you cannot be certain that the checks are neutral. External auditors are independent parties who provide a realistic and impartial view into the company's conduct.
Why do independent auditors not give complete assurance?
Independent auditors do not provide complete assurance because their work is based on sampling rather than a full examination of every transaction. They assess the risk of material misstatements and use professional judgment to determine the extent of testing required. Additionally, inherent limitations exist, such as the potential for human error, fraud, and the subjective nature of accounting estimates, which further restrict the level of assurance that can be offered. Consequently, auditors provide reasonable assurance, indicating a high level of confidence but not an absolute guarantee.
Is there a suspected fraud credit card error on your account?
Is there a suspected fraudulent credit card error on your account?
What is an intentional mistake in the account balance called?
However, if this mistake was intentional (i.e., the client failed to record the sale on purpose), auditors refer to the mistake as a fraud.
Differences between fraud and error?
differences between errors and frauds
How is auditing related to mathematics?
Auditors use math to ramdomly select transactions/files to look over for the audit based on how certain they want to be that there is no fraud. 90 % certain will require looking at fewer files that 99% certainty. Auditors look at the math on certain transactions for fraud. If someone bought 10 things that cost 100 dollars each, then the contract calls for a 3% discount, what should have been paid? Compare to what was really paid. If not the same is this evidence of fraud, embezellment, or ust a mistake?
How do you use a proof of cash?
A proof of cash is a four-column bank reconciliation that has proof of disbursements and receipts. It is used by auditors when they are looking for errors, fraud, misstatements, and discrepancies.
Why auditor cannot give absolute assurance?
Auditors cannot provide absolute assurance due to the inherent limitations of the audit process, such as the use of sampling rather than examining every transaction and the potential for human error or fraud that may go undetected. Additionally, financial statements are based on estimates and judgments that can vary significantly, adding uncertainty to the audit results. Consequently, auditors can only offer reasonable assurance that the financial statements are free from material misstatement.
