Auditor’s responsibility for Fraud&Error

This is clearly not an exam style and standard question – rather it appears to be a test of knowledge and I think “not responsible” should not be taken to mean “has no responsibility whatsoever”. If you read the auditor’s responsibilities in the auditor’s report (e.g. page 31 of the notes) the whole point of the audit is to provide reasonable assurance that financial statements are free from material misstatement whether due to fraud or error. To give that assurance the auditor must plan and perform an auditor with reasonable expectation of DETECTING material misstatement. If an auditor were to fail to detect a material ERROR that would most likely to amount to negligence (would have to be decided on in a court of law). The auditor is less likely to be found guilty of negligence for failing to detect material FRAUD because, by definition, it involves some concealment.

In short – the auditor has no responsibility whatsoever for prevention (of either fraud or error) but has specific responsibilities concerning detection. Management is, of course, primarily responsible for the prevention, detection and correction of misstatements.

You are welcome!