Question

“One should not expect auditors to find all flaws and errors in an accounting system.”

Post your response giving reasoned arguments as to why you agree or disagree.

Answer 1

Answer

Auditing is the on-site verification activity, such as inspection or examination, of a process or quality system, to ensure compliance to requirements. An audit can apply to an entire organization or might be specific to a function, process, or production step.

Yes, the statement above "One should not expect auditors to find all flaws and errors in an accounting system.” is correct.

-Because Audit is based on sample testing.

-Audit risk is the risk that the financial statements are materially incorrect, even though the audit opinion states that the financial reports are free of any material misstatements. The two components of audit risk are the risk of material misstatement and detection risk.

- Audit is based on materiality. Many issues or errors may be present in financial statements, but may not be material.

-Auditors responsibility is to ensure and certify that the financial statements present true and fair view. I does not necessarily mean that all accounts prepared are accurate without any errors.

-Auditors are required to place reliance on the information provided by the management. Though auditors are expected to perform basic validation checks, there is no guarantee that any deliberate misrepresentation by the management regarding the accounting system will be detected by the management.

-an accounting system may have flaws which may be rectified and presented before the auditors, i.e. through passing journals, etc. Auditors in such cases, may not be in a position to detect the actual issues present in the accounting ystem, as the issues are resolved at the management end itself.

Many reason for not expect to auditors have to find all flaws and errors in an accounting system.