Standards of auditing activities detection of fraud and error

Standards of auditing activity provide that in the process of auditing verification the auditor should come to reliable knowledge about the revealed facts. National auditing standards state that reliability is the full proof of the fact.

All final conclusions of the auditor should be verified by a system of credentials. According to some experts, the quality of evidence is determined:

1) an approximation to a real event;

2) establishing the causal correspondence between the fact and the evidence;

3) reliability of sources. This is the basis for internal standards of auditing.

In accordance with the first paragraph, three main classes of evidence are used: natural, artificial and rational reasoning. Standards of auditing activity provide that the basis of division is the facts on which the statement is based. Unfortunately, the existing legal norms and established traditional standards of auditing do not completely regulate the question of how the auditor should act if, under a contract concluded with the board of directors, he has established the appropriation of a certain amount of money by the manager or chief accountant of the firm. It seems that, first of all, he is obliged to inform the directors about this, who in turn must bring the facts to the notice, depending on the amount of theft, the shareholders meeting, since the auditor must inform the founders about the violation of the law in accordance with the law.

If the auditor during the audit found that part of the management board or executive director is responsible for acts or omissions that usually entail obligations for compensation for harm, or that part of the board or executive director acted in violation of the law, he should note this in a report . The auditor also faces the problem of reporting abuse of investigative bodies. It is important to keep in mind who owns the enterprise or firm.

If the enterprise is a state enterprise, then in accordance with the article of the Criminal Code, this is "a failure to report on ... a serious crime." Modern auditing standards establish the principle that if in the course of checking all the circumstances of settlements with the budget, the auditor has established an understatement of payments to the budget, then he should help the company's accountant to correctly compute tax calculations and recommend making appropriate changes to the balance sheet. Reporting to the tax service should not be, because it contradicts the status of audit activity as a system of independence of financial control. The activity of the auditor does not imply insurance of the client's liability, as this is the business of insurance organizations. For all the significance reflected in the normative acts of the indicators, they were clearly not enough for an objective, reliable assessment of economic insolvency in the course of an audit.

The solvency of a modern market enterprise can not be characterized only by the current liquidity of its assets and can not serve as a basis for suspicion of fraud. Therefore, such violations can only be an intermediate characteristic of the state of the enterprise's finances or other auditable resources. Through the implementation of effective measures by the company, its reputation can be restored without a particularly tangible impact on its solvency and financial stability in general.

Thus, the audit should not serve as an instrument for establishing and specifying wrongful acts, it is not its function and it is simply not justified to do this through financial audit.