How Auditor can counter scams

With every breaking news  with respect to fraud/misappropriation/ or untamed demands of different government authorities relating to earlier years the most effected and harassed person you will find is the auditor or the auditing firm who has carried out audit of that particular year. Even unconcerned professionals in the field of audits also think for a while about their past completed professional assignments and future uncertainties they are going to pass through. Today’s auditor is like an army man who joins his job with certainty but is uncertain about his survival.

During recent past we have observed that even after completing the audit assignment in number of cases events have occurred which if incorporated in the final accounts would have disastrous impact on the declared numbers. These events can be categorized as under:

°  Willful misappropriation or hiding of the information by the management.

°  Willful misappropriation or hiding of the information by the management and the auditor.

°  Failure to detect misdeeds of an employee and or employees both by the management and the auditors.

°  Unknown huge demands received from different authorities.

Now the question is how an auditor can ensure that the techniques he has been learning through various means are enough to insulate him against any adverse findings at a later stage. There are certain qualifications/statements which auditors use while commenting on the accounts before signing the final accounts but are such   qualifications/statements enough to absolve an auditor from his responsibilities. To lessen the chances of mistakes being committed and to bring more efficiency in our working we can think of taking some steps listed as under.

1. Audit working papers are of immense help if something goes wrong at a later stage. Emphasis must be given for storing and creation of quality audit working papers. It is not mandatory to maintain records in physical form, we can keep records in soft form to make best use of present day limited office space as well as make retrieval of records easy and quick. The review of audit by seniors should be made more meaningful/efficient and effective to ensure that the chances of committing errors are minimized.

2. Present day audits have become so complicated due to adoption of latest software, technologies and frequent changes in the law, quick growth of business houses, takeovers, mergers etc. It is of immense importance to keep oneself updated with the changes taking place. Keeping in view the size of majority of our audit firms it is very difficult to ensure that we are updated in all the subjects expected to practice while carrying our jobs. Subject specialization is the demand of the hour and it is universally true that a person cannot be expected to be having expert knowledge of all the subjects. To overcome this problem we can either merge small audit firms or pool our resources or we can create local resource centres jointly by sharing the expenses. A good and updated study material will help us to keep abreast with the latest changes.

3. Audit staff must be educated about the accounting software the client is using and the types of reports which can be created. Operating the software is not important but knowledge of various reports particular software can generate is of utmost importance as this will be helpful in verifying all sorts of transactions/accounts/reconciliations etc. Using software for creating variety of reports especially in multi location, multi product huge business houses save a lot of time in completion of the audit assignment.

4. Analytical reviews which used to be very difficult in the past can be carried out in much efficient and easier ways with the help of ERP software. An auditor must verify the reasons of variations while comparing current year figures with the previous years. Customized auditing guidelines may be documented with respect to every client to enable auditing staff to have some idea about the accounting of a particular client and the area requiring special attention during the audit. It will be appreciable if we document guidelines about the process to be adopted for conducting audit of the all the clients based on the nature of their business and our past experience.  

5. Continuous up gradation of knowledge through sharing and discussions, attending seminars and training should be made part of the office planning and organization. Quality service not only will minimize mistakes but will increase efficiency in the job delivery system resulting in higher professional earnings.