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

The assertion made above is correct. One should not expect auditors to find all flaws and errors in an accounting system. The key reasons are as follows:

1. Audit is sample based testing. A sasmple check cannot be expected to detect or find all flaws in an accounting system

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

3. 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.

4. 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.

5. Finallt, 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.