Lesson: Auditor's Responsibility in Detecting Fraud

In this lesson, the auditor's responsibility in detecting fraud is discussed in detail. Key points include: the auditor must design the audit to provide reasonable assurance of detecting material errors and fraud, immaterial fraud committed by employees should be reported to management, any material fraud discovered should be reported to the audit committee, and when an officer or management commits fraud, whether material or immaterial, it must be reported to those charged with governance. Additionally, if those charged with governance do not remedy the situation, the auditor should consider withdrawing from the engagement. Finally, it is emphasized that if financial statements are issued with an unmodified opinion and contain material misstatements due to fraud, the auditor will not be at fault, provided that they have planned and performed the audit appropriately.