Over the past couple of years there has been an increased focus on auditors and their responsibility to detect fraud in companies. The reason for this is that there have been a number of high profile fraud cases in Denmark. These cases have given the users of the financial statements the feeling that the auditors involved haven’t done what they were supposed to do. The purpose of this thesis is to investigate if the auditors’ practical procedures fulfil the requirements in the international audit standard (ISA) 240 as well as whether the requirements in ISA 240 match the requirements of the users of the financial statements. Additionally, the thesis will consider whether the auditors involved in the big fraud cases have managed to fulfil these requirements. We began by describing ISA 240 and its requirements for auditors. Here we found that it is not the auditor’s responsibility to detect fraud in a company. His responsibility is only to provide a high level of assurance that the financial statement do not contain errors or fraud as it is not possible for the auditors to detect all errors and frauds in the financial statements. The responsibility to detect fraud primarily rests with the company’s management. Next we interviewed a number of auditors to find out how their practical actions to detect fraud matched the requirements in ISA 240. We found that their practical actions to detect fraud did in fact match the requirements in ISA 240. Their answers in the interviews showed that they do not aim to detect fraud in a company, however they do consider the risk of fraud in a company and make an assessments regarding fraud. An auditor cannot be held responsible for fraud, if he lives up to the requirements in ISA 240 and exhibits a professional skepticism during the audit. Our analysis of the fraud cases, on the other hand, showed us that there may be situations where the auditors do not fulfil the requirements in the international audit standards including ISA 240 and therefore should be held responsible for that. Finally, in order to find which expectations the users of the financial statement have for the auditors we interviewed four users of the financial statements. These users were shareholders, directors and one consultant from Erhvervsstyrelsen. In their opinion the auditors have a responsibility to detect fraud in a company and they expect that when an auditor has finished an audit of the financial statements he should have detected any irregularities. Therefore, we Side 2 af 181 observe an expectation gap between the financial users’ expectations and the auditors’ responsibility and actions to detect fraud. This can be a result of the users’ lack of knowledge and their unreasonable expectation towards auditors or it can also be the result of the auditors’ inability to fulfil the requirements in the legislation, which is what the analysis of the fraud cases also showed us.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||182|