The roles of an Auditor in Discovering Illegal Acts - Essay Example

Task: Week 2 Discussion and Participation Questions The roles of an Auditor in Discovering Illegal Acts When implementing SAS no. 99, auditors often find themselves in a complex arena of systematic approaches to detecting fraud. Most often, the auditing process fails due to barriers which escalate from the auditor’s ability to uncover fraud accurately. Such problems often involve inadequate characteristics of professionalism. Such barriers revolve around the auditor’s accounting profession of independent accounting with regard to experience, training, skills and education. Primarily, expectations gap form a complex barrier in the ability of an auditor to uncover frauds at costs that are reasonable. For instance, the actual practices that an auditor is capable of may be far away from the expectations of the stakeholders. In such cases, stakeholders presume auditors as being faults. More so, regulatory and legal impediments are barriers that auditors face. The present audits are also characterized by limits that guide the extent to which auditors can uncover reasonably. The limitations are not often aligned with auditing standards for the methods of auditing are limited while the audit is constrained by cost. Furthermore, these barriers emanate from educational issues of the auditor. Education of the auditor will enable him or her to acquire skills and experience while he or she undergoes training in his or her profession. The vice versa cannot be true. More so, the communication between the auditor and the company’s management can be a substantial barrier especially when communication barriers come from the auditor’s side. Some of these barriers can be eliminated by auditors, whereas others are beyond them. For instance, the auditor should ensure the stakeholders expectations are moderate by explaining to them the current provisions of auditing. The auditor should also be able to cite the best methods among those accepted by regulatory and legal impediments. They should set objectives to guide the audit process. Above all, the auditors should ensure that they are well educated in that profession and that they have acquired adequate skills before going to practice in the field. Elimination of these barriers will ensure a successful audit process. The Role Played by the Setting of Objectives in Auditing Planning for an audit process is highly significant for the success of the process as a whole. Setting of objectives prior to conducting an audit provides a clear framework that guides the audit process as it is in progress. First of all, setting of objectives places the auditor in a position of the person who inquires on fraud issues. The auditor acquires first hand knowledge given that he or she can get vital information from the internal workforce on the people who were involved in fraud. Ramos (35) asserts that; those people who have significant information on the individuals concealing and committing fraud, have always said that they would give out the information, but they were not asked. Hand in hand, the objectives enable the auditors to visualize risks as well as respond to them accordingly. This implies that; the setting of objectives creates a clear guideline for conducting the audit process, and it sums up to the success of the audit process. Significant steps can be taken to ensure that the objectives of the audit are met consistently. Prior to the conduction of an audit, the auditors should have a proper internalization of fraud as an aspect. They should have the awareness and a better understanding of fraud. Besides, they should be familiar to risks that are attached to auditing and the necessary steps for mitigating them. For instance, auditors should have adequate information necessary for identifying the risks attached to misstatement of material as a result of fraud. They should also have the capacity of assessing those risks after post-evaluation of the entity’s controls and programs. More so, the auditors should be bold enough to have a timely response to the outcomes of the audit process. The Roles of Auditors towards Realization of Misstatement-Free Financial Statements With regard to the provisions of SAS 109 and 99, the auditor should reasonably assure that the outcomes of the audit process are free form material misstatements during presentation. They should engage in enquiring on issues of compliance with the regulations and rules of auditing. However, auditors face their nightmare in their maneuver to uncover fraud when the management turns out to be uncooperative. Such barriers lie within the clients especially when they tend to dictate the outcome of the audit. In most cases, the management tends to be unresponsive to enquiries from the auditor. Possibly, this may indicate fraud, but on the hand, it may signify the rigidity of management in conducting senior management operations. It is vital for the auditors to enlighten their clients on the significance of complying with the regulations and requirements of auditing, in a bid to eliminate managerial barriers. The auditors should profile the stakeholders so as to cite the best approach of going about the education of clients. The Roles of Auditors Whenever Fraud Cases are Detected During auditing, the auditors have to be vigilant so as to be had the ability of citing the signs of fraud from the people they interview. Auditors should have a better understanding of the typical signs of fraud which may include restlessness in the form of sweating, avoidance of eye contact, making unnecessary non-verbal communications and creation of interferences in the form of disturbing noise. At this juncture, the auditors should have knowledge on the best approach to suspected fraud cases. They should have exceptional communication strategies to enable them acquire the information that they require from persons who they interview. In such cases, clear and consistent communication may eliminate the cases of disinterests. More so, auditors should focus on accumulating evidence when the initially provided evidence is not enough to build an assertion that there was fraud. Secondly, auditors have to consider taking additional actions besides accumulating evidences. In such cases, the auditors may lack sufficient reasons to believe that illegal acts exist either directly or indirectly. Lastly, the auditors should know how to act whenever an illegal act is detected. They should understand the chain of command in the client organizations. The Roles of Auditors in Handling Executive Issues of the Client Company When handling executive issues in the client company, auditors are often subjected to various temptations. Given that the public relies on the auditor for the examination of the company’s financial statement, auditors may be in a mix-up of being tempted to meddle in the company’s internal affairs. If an auditor is carried by this wave, then the outcome of the auditing may be biased. In this case, auditors should be impartial persons of integrity and should not in any way, have interests in the company’s executive affairs. Auditors should portray professionalism in their work and must have ethical conduct. Any barriers that may emanate from the company’s top management should be approached boldly through the reporting of illegal acts to the necessary authority with maximum accuracy. More critically, auditing should be conducted by both an external and an internal auditor, so as to reduce the chance of the outcome being corrupt. The external auditor can work together with the internal auditor to come up with results that are more accurate and free from misstatement. The Roles of Auditors in the Management of the Auditing Process During the process of conducting an audit, auditors have to keep any information relevant to any instances of fraud. Auditors should have the capacity to conduct a sound evaluation of the evidences gathered in the process of auditing so as to come up with accurate conclusions on the outcomes of the audit. This brings the implications that the auditor has to assure the stakeholders that the outcome of the audit will have no instances of material misstatements. However, in the maneuver to maintain consistency in the process of auditing, some barriers may come from a diverse spectrum. For instance, manipulation of data, poor record keeping, uncooperative management and poor testing and documentation can form strong barriers to the detection of fraud. Auditors should be keen on monitoring the nature of data all through the process since manipulations can result to a significant data misrepresentation. Such syndicates often take place in the top management. The auditors should be free and close to the employees at the downstream of the organization, for they can give them vital information that can lead to the detection of fraud. In this case, the auditors should be familiar with fraud reporting at different levels. For instance, accumulation of evidence and other actions when there is a belief that an indirect or a direct-effect illegal act is in existence. Another level may also include the accumulation of evidence and other action when there lacks a reason to believe that a direct or an indirect-effect illegal act exists. Similarly, another level of reporting fraud can be the accumulation of evidence when there lacks a belief in the existence of an indirect illegal act. Conclusion In a bid to achieve the set goals and objectives during the auditing process, auditors should understand their roles fully alongside having adequate professional training and experiences. For instance, they should have a clear definition their roles on; discovery of illegal acts, setting of strategic auditing objectives, going about fraud cases, handling executive issues of the client company and management of the auditing process as a whole. Furthermore, for the purposes of maintaining consistency in the auditing process as a whole, the auditors should consider formulating appropriate procedures necessary for detecting any illegal act easily. The procedures should also have an indication of on how such acts can be reported to the necessary authorities, in this case, the management registrar. Works Cited Ramos, Michael. “Auditors’ Responsibility for Fraud Detection.” Journal of Accountancy, 2003. Vol. 195(1): 38-35. Read More