Question 1

Are auditors responsible for finding all fraud in a company?

Accepted Answer

No, this is a common misconception. While an audit may detect fraud, its primary purpose is not to do so. The primary responsibility for the prevention and detection of fraud rests with the company's management. The auditor's responsibility is to obtain reasonable assurance that the financial statements are free from *material* misstatement, whether caused by fraud or error.

Question 2

Can a company choose not to have an audit?

Accepted Answer

It depends on the size of the company and the country's laws. Most large and all public limited companies are legally required to have an annual external audit. However, some jurisdictions allow smaller private companies to be exempt from a statutory audit if they meet certain criteria (e.g., low turnover and few employees).

Question 3

Who does the internal auditor report to?

Accepted Answer

The internal auditor typically reports to senior management and/or an audit committee, which is a sub-committee of the Board of Directors. This is to ensure they have sufficient authority and independence from the departments they are auditing, even though they are employees of the company.

Auditing and Stewardship of Limited Companies

What you need to know