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?

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.

ekkarill92 answered 2 years ago

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