What an auditor does when finding fraud or illegal acts.

Summary

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For the Practicing Auditor - Column

Auditors should take several steps after discovering that a client has committed a fraudulent or illegal act. These steps include informing the board's audit committee, considering the implications for other aspects of the audit, insisting that the financial statements be revised and withdrawing from the engagement in writing. Auditors should report fraud not material to the financial statements to client management. Two hypothetical scenarios are presented to illustrate how auditors should respond to the discovery of fraud.

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Extract

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What an auditor does when finding fraud or illegal acts.

While most auditors have encountered client errors, discovery of an irregularity or illegal act with a material effect on the financial statements is not an everday occurrence. Discovering an illegal act, particularly when senior management is involved, can raise o...

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