Question

In: Accounting

One of the new board members of the entity under audit is a bit confused about...

One of the new board members of the entity under audit is a bit confused about illegal acts. Explain to one of the board member why the auditor does NOT help prevent illegal acts and fraud. What is the role of the auditor with respect to illegal acts and fraud?

Solutions

Expert Solution

Ans. An act in violation of a law in the jurisdiction in which it is committed is defined as illegal act. It is management duty to run the business and to prevent illegal acts and fraud. Management has the sole responsibility to ensure that there is no illegal acts and fraud. Auditor duty is to report whether books of accounts prepared by management gives true and fair view of transactions presented in books of accounts. Auditor is a watch dog, he is not blood hound. Auditor's duty is to report if there is any illegal act and fraud committed in business whereas it is management duty to prevent illegal acts and fraud. This is the basic reason that auditor report's does not guarantee the future viability of any enterprise. Auditor provides reasonable assurance not absolute assurance on books of accounts. So, based on above discussion we can say that it is the management's duty to prevent illegal acts and fraud whereas auditor's role is to report illegal acts and frauds if they are present in books of accounts.    


Related Solutions

Is the government's new requirement that board members of the audit and compensation committees be independent...
Is the government's new requirement that board members of the audit and compensation committees be independent sufficient? Should there be a way to resolve this inherent conflict of interest or is this just an unpalatable side effect of a free market or something else? please answer in your own words and as long as you can becuse its opinion qustion ?
an audit committee must be comprised of "outside" members that sit on the board of directors,...
an audit committee must be comprised of "outside" members that sit on the board of directors, must be "financially literate" and have at least one "financial expert". With this in mind I want you to find a publicly traded company and review their audit committee. Pick whatever company you wish! Please report as your discussion topic the following: Company you selected (along with company url) Names of individuals on the audit committee Which member of the audit committee would you...
I had a question about ethnicity. I'm writing a paper and am a bit confused on...
I had a question about ethnicity. I'm writing a paper and am a bit confused on the word ethnicity. For example if a person is half asian and half white with some european ancestry what would you consider their ethnicity to be? And how does that differ from race?
Hello, I am studying and I am a bit confused about registers. There are segments registers,...
Hello, I am studying and I am a bit confused about registers. There are segments registers, data registers, pointer registers, index registers. But I do not really understand where these are found. Are they found in 8086 architecture? For instance if I ask what type of registers are found in 8086 architecture what will be the answer? All of these or only segment registers?
At a corporate board meeting, one of the members indicates that the FASB has passed a...
At a corporate board meeting, one of the members indicates that the FASB has passed a new accounting update to take effect concerning the nature of lease accounting. As of now the company has leases which are both capital in nature and operating. The company also has several forms of debt with banks. The board member asks you as the Chief Financial Officer to give a 5-10 minute presentation on a summary of changes and how those changes could impact...
Matt Litkee is confused about under- and overapplied manufacturing overhead. Define the terms for Matt, and...
Matt Litkee is confused about under- and overapplied manufacturing overhead. Define the terms for Matt, and indicate the balance in the manufacturing overhead account applicable to each term.
You are one of the members of the audit team of Computer express which is growing...
You are one of the members of the audit team of Computer express which is growing at a rapid rate despite being in the competitive industry. The following is part of the information obtained from a planning meeting which the audit manager had with Computer express management.    2018                       2019 K’000                     K’000 Revenue                        438,616                 373,700 Gross margin                  0.83                        0.79 Expenses as a percentage of revenue:                    Distribution costs                             0.05                        0.10 Administrative expenses 0.17                        0.13 Selling expenses...
Case Assume that the new entity, AMT, was established, that the board accepted Helen Grant’s recommendation...
Case Assume that the new entity, AMT, was established, that the board accepted Helen Grant’s recommendation of an annual audit for the company, and that after conducting a tender for the audit, AMT selected ABC Auditors (ABCA) to conduct the audit. Unfortunately, Helen Grant found that, for personal reasons, she was unable to continue in the new role as CFO. The case continues… ABCA was selected to conduct the audit because one of the board members of AMT was aware...
DEFINING A PROJECT One of your employees is confused about what is a project and what...
DEFINING A PROJECT One of your employees is confused about what is a project and what is a new process/procedure. She has given you a list of changes going on at your facility and asked you to help her understand.   Review the situations described in the Table below. Indicate whether each situation meets the definition of a project or not. Explain to her why it is or is not a project. Scenario Project Why? Yes No The Assistant Director is...
Smith, a young CPA and one of the audit team members for Darwin Electrical Appliances Ltd...
Smith, a young CPA and one of the audit team members for Darwin Electrical Appliances Ltd (Darwin), has developed very good insights into the company’s systems in the last 12 months and was asked by his partner, Chris, to draft a report on the reliability of the internal control at Darwin for review. The report is to be used as a part of a due diligence assurance engagement for Darwin’s prospectus. Darwin wants to be listed on the Australian Securities...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT