There is a difference of perception between the public and the auditing profession in relation to an auditor's duty regarding errors and fraud.
The auditor sees his duty as:
“The independent examination of and expression of opinion on, the financial statements of an enterprise by an appointed auditor in pursuance of that appointment and in compliance with any relevant statutory obligation”.
While certifying the final accounts of the concern, the auditor, has to face a specific problem. He has to certify in his report as to whether the profit and loss account reflects the true profit or loss for the financial year concerned and the balance sheet exhibits a true and fair view of the state of affairs at the end of the financial year. The emphasis is on financial statements. However the public, including much of the business community, tend to see an auditor's duties in terms of the detection and possibly prevention of error and fraud.
Accordingly, he has a duty to ascertain frauds and errors to justify the correctness of the accounts. This duty of detecting and preventing errors and frauds can be analysed in the following ways:
Detection of Errors and Frauds
It is desirable that the auditor should exercise reasonable care and skill, so that he may detect errors and frauds. If he carries routine checking and vouching more carefully and checks the books of accounts thoroughly, he may be successful in his duty. Whereas, in doing so, if he is not successful but he himself feels that he has not shown any negligence in his duty, then he cannot be held responsible for any error or fraud which remains undetected in accounts. Hence, an auditor is not an insurer.
Prevention of Errors and Frauds
The auditor has no authority to introduce remedial measures for the prevention of errors and frauds. All that he can do is to advise his client and suggests the ways and means to prevent them.
