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Greatly explained sir ! Your lecture is amazing.
I just had one confusion. Here in this lecture called Auditor’s Report at around 10-12min you said that Auditor says its not their responsibility of failing to detect any fraud successfully – ie they cannot detect all frauds in other words.
However, in the previous lecture of Professional Ethics in one of the examples you gave you demonstrated if my memory recollects correctly – that the company could threaten an auditor to sue him for failed fraud detection if he does not sign a cleared audit for the current term.
Please reconcile or recorrect.
Welcome to my forum Asif! I am not the lecturer in the videos but I do now look after all the other AA and AAA materials available on this site and am responsible for the audit forums.
Please see in the Illustrative example of the auditor’s report at the top of page 33 of the notes:
“Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from MATERIAL misstatement, whether due to fraud or error ….”
Auditor’s do not/cannot identify “all” errors … see page 30 – that’s why there is only “reasonable assurance” and fraud even less so (because, by definition, fraud involves deceptions – see s.1 on page 113 at the beginning of the fraud and error Chapter 25.
I don’t know which earlier lecturer you are referring to – it sounds as though it might have been in the ethics lecture – as an example of an intimidation threat. So, for example, management says “oh, and by the way, we expect a ‘clean’ report this year because you didn’t deduct the fraud that was going on last year”. Auditor’s liability isn’t actually examinable in AA but, in fact, a client can threaten to sue all they like – it’s NOT the auditor’s responsibility to prevent/detect and correct fraud – it’s management’s (see first para of the responsibilities of management and TCWG on page 32).
(An auditor would only be liable to the company/shareholders as a whole for breach of contract or negligence – but this isn’t examinable.)
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