Accounting

An auditor has the responsibility of performing and planning audit in order to obtain assurance that is reasonable on whether or not the financial statements prepared by a company are free from any material misstatement, regardless of whether such material misstatements are caused by frauds or errors. Due to the nature of the evidence of audit and the fraud characteristics, the auditor can only be in a position of obtaining reasonable assurance, but not an absolute one that material misstatements have been detected. The auditor does not have responsibility of performing or planning an audit in order to obtain assurance that is reasonable, that misstatements regardless of whether they were caused by fraud or errors that do not meet the material threshold of the financial statements of the company are detected (Heim, 2002).

Auditors responsibility for fraud
The main responsibility of auditors is ensuring that the financial statements and other books of accounts prepared by a company reflect a fair and a true position of the company. It is not the duty of an auditor to detect all misstatements in such books, whether they are as a result of errors or frauds. However, the auditor owes duty of care to several stakeholders of the company he or she is auditing. Therefore, the auditor is under obligation to disclose any material misstatement that is detected in the course of the audit work regardless of whether the material misstatement is as a result of errors or frauds. The auditor is therefore under obligation to include any material misstatement detected in the final audit report. The responsibility of fraud detection and prevention rests on the personnel charged with management and governance of the company and not on the auditor. Hence, if by any chance the auditor fails to detect some misstatements whether they are material or not, then the auditor shall not be held liable. This will however not be applicable if such omissions were as a result of negligence. Due to the highly dynamic business world and the increased frauds being reported, the responsibilities of auditors in frauds detection and prevention have been reviewed severally. In fact, according to international accounting standards, an auditor carrying out an audit has the responsibility of obtaining assurance that is reasonable that all the companys financial statements are free of any material misstatements irrespective of whether such are caused by errors or frauds (Apostolou  Crumbley, 2008).

In the modern business world where frauds can be penetrated through several channels, the duty of fraud detection and prevention has been vested on both the entities management as well as the auditors. Whereas the personnel of the entity charged with its management and governance have the primary responsibility of detecting and preventing frauds, the secondary responsibility is vested on the auditors. In overall, the goal of an auditor in carrying out an audit as per the requirements of international standards of accounting is to maintain the professional skepticism attitude. In this case, the auditor should perform and plan the audit with this attitude in mind. The auditor should therefore appreciate that there may exist circumstances that can make the financial statements being audited to be misstated materially. The skepticism attitude of an auditor should basically include being alert, a mind that is constantly questioning various entries and paying more attention to conditions that are likely to indicate any possible misstatement resulting from either frauds or errors. Such skepticism shall greatly assist the auditor in carrying out the secondary responsibility of fraud detection and prevention (Apostolou  Crumbley, 2008).

It is the duty of an auditor in fraud detection and prevention to assess and identify the material misstatement risks of the entity together with the environment in which the entity is operating in. In doing so, the auditor has to use the engagement team and hold some discussions with the companys financial statements susceptibility to misstatements that are material resulting from frauds. Such a discussion is very important in enabling the auditor to place special emphasis on where and how the financial statements of the entity might be prone to misstatements that are material resulting from frauds, including the manner in which such frauds may take place. The international accounting standards demand that an auditor carries out procedures of risk assessment. The aim of this is to enable the auditor obtain more information to be used in identification of material misstatement risks resulting from fraud (Ramos, 2003).

The primary responsibility of detecting and preventing frauds is vested on the individuals with the mandate of governing and managing an entity. However, the auditor who is auditing the financial statements of the entity has the secondary responsibility of fraud detection and prevention. The auditor should therefore use all the procedures laid down by the international accounting standards in ensuring that any material misstatement is detected and reported in the final report. Should the auditor fail to use such procedures and subsequently fails to detect any material misstatements whether resulting from frauds or errors, then the auditor will be held liable of negligence.