For the following link ( https://www.forbes.com/sites/jwebb/2016/08/25/pwc-sued-
ID: 2595861 • Letter: F
Question
For the following link ( https://www.forbes.com/sites/jwebb/2016/08/25/pwc-sued-for-missing-2-9-billion-scam-do-auditors-have-a-public-responsibility-to-prevent-fraud/3/#36aca6662941 ) ;
Write an opinion about whether you believe auditors should have a public responsibility to 'prevent' fraud. I put the word prevent in quotations, because you will have to discuss how they can prevent fraud (what specific procedures they would use to do that).
Remember this is an opinion piece, so you can discuss why you believe the auditor can not prevent fraud instead, if you choose.
demonstrate an understanding of what auditors do (as consistent with what you learned in class about the auditor's role) and what they are required to under the standards you will receive more points than if you only state "No, because they are not required to or Yes, because it is the right thing to do" for example. NOTE: It is possible here to make a case that the answer is Yes/ No, but they can better detect fraud (and discuss how they can better detect fraud)/ or No, but they should be responsible to disclose fraud to the public (and discuss very carefully how the standards, the auditors and the audit client's should change to make that happen)
There is no page requirement
Explanation / Answer
The primary thing that is to be remembered is that an auditor is appointed to express an opinion on the financial statements but not to find out frauds or prevent frauds. The primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance. The management should place a strong emphasis for fraud prevention which could persuade individuals not to commit frauds. An auditor conducting audit in accordance with various standards of auditing is responsible for obtaining reasonable assurance that the financial statements are free from material misstatements whether caused by fraud or error. Owing to the inherent limitations of an audit there is an unavoidable risk that some material misstatements will not be detected even thought the audit is planned and performed in accordance with standards on auditing. Fraud may involve sophisticated and carefully organized schemes designed to conceal it, such as forgery, deliberate failure to record transactions or intentional misrepresentations made to the auditor. Such attempts of concealment may be even more difficult to detect when accompanied with collusion. The subsequent discovery of material misstatement of the financial information resulting from fraud or error existing during the period covered by the auditor’s report, does not in itself, indicate that whether the auditor had adhered to the basic principles governing an audit. The question of whether the auditor has adhered to the principles of audit such as performance of audit work with requisite skills and competence documentation of important matters, details of audit plan and reliance on the internal control system, nature and extent of compliance and substantive procedures followed is determined by the adequacy of the procedures undertaken in the circumstances and the suitability of audit report based on the results of the procedures. The liability of the auditor for failure to detect fraud exists only when such failure is clearly due to not exercising his skill and due care.
Conclusion:
After reading the above explanation, u can conclude that the auditor has no work to “prevent fraud”. The auditor MAY “detect fraud” if so happened while performing his audit. He is appointed to express an opinion but not to detect frauds. Of course he should have public responsibly. He can do it by performing his duties for what he is appointed for. The auditor has no power to place controls and procedures in an organization. It is solely the work of management.
In the present case also, if PWC cannot prove themselves that they had conducted the audit in accordance with standards of auditor and due care, they are held liable.