I don't know if it is the primary function of the auditor to detect fraud but through auditing a firm's financials, it may leads to the discovery of fraudulent activities which they will have a duty to question it. But by then, the game is over.
And human are so creatives that someone is bound to exploit the system when he/she judged that the rewards outweighs the risk. If they are out to con people, they will choose the best time to do it so most probably will no be at a period when the firm is due for auditing. 3 months is more than enough for things to turn sour.
(05-02-2014, 05:48 PM)arriyana Wrote: [ -> ]But you do have to understand that audit is a very time consuming and manpower consuming business. To identify fraud will take substantially more effort and cost to detect and uncover them.
Problem with the audit industry now is even shareholders are unwilling to folk out big sums of money to afford a proper audit. How can one expect auditors to stand by the shareholders side then?
Yes. Provision of assurance services is in the end a business, with a need to balance robustness of work performed with recoverability of costs incurred. Auditors, therefore, tend to perform only what's necessary to qualify as work done.
Besides, how many times have we gone to a doctor and received a inaccurate diagnosis, especially if we're not honest with our symptoms.
When you get 4 or 5 fresh grads coming to your office at the end of the year and expect them to uncover some fraud or even to deal with CFOs or finance manager with 10+ years of experience, who do you think can prove easily some major inconsistency is uncovered.
One key issue for any audit checks is sampling. In the balance sheet one will see a simple consolidated cash amount but this cash cam be held by 100 over subsidiaries or different bank accounts in different banks which you think a 2 week review is enough to cover?
Any findings by the young auditor will be heavily scrutinized by the audit manager followed by e audit partner. To issue something really negative, it will almost immediately mean to lose biz the next year. This is even before the finding can be raised to the audit committee.
So why bother?