THE ROLE OF AUDITORS IN FRAUD PREVENTION AND DETECTION IN AN ORGANIZATION

0
517

THE ROLE OF AUDITORS IN FRAUD PREVENTION AND DETECTION IN AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

One of the primary reasons for an independent audit is the inherent potential conflict between an entity’s management and users of its financial statements. Management has an incentive to the information presented in financial statements since it is the means used to evaluate management’s performance. Management exercises a great deal of discretion in preparing financial statements and in using resources entrusted in it’s operating the entity. An audit provides reasonable assurance that management’s representations on these activities are liable. Thus, audit has value because management’s representatives on its performance and stewardship are examined and reported or by expert outside management’s control. The purpose of audit therefore, is to provide assurance to the shareholders’, bankers, creditors, government agencies and authorities, investors, and the public at large. These people need confidence that the picture of the company as given by the directors to obtain a second opinion from an expert (the auditor). Other than exposing errors and fraud and testing the reliability of a firm’s controls financial audits can alert management to weaknesses in the firm’s control as well as suggest operational improvements that could be undertaken. These are highlighted in the management letter from the auditors. Strategic systems auditors provide a top down approach to auditing by first examining a firm’s business strategy and keys to competitive advantage.

Financial audits may be performed for private companies, registered charities, some governmental and public entities certain forms of private companies are required to have an external audit. Private companies typically request financial audits year after year because lenders may have required an audit or owned may want to have external unbiased eyes look at the financial statements to determine if the company is complying with all the required accounting principles charities would require a financial audit to show the financial status of the organization to potential donors.

DOWNLOAD COMPLETE PROJECT MATERIAL

THE ROLE OF AUDITORS IN FRAUD PREVENTION AND DETECTION IN AN ORGANIZATION

Leave a Reply